How Automated Fare Collection Alleviates Top Transit Agency Challenges

May 4, 2023

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Author: Ana Stanca

Demand Generation Leader, Enghouse Transportation

Transportation industry stakeholders face a variety of operational challenges that impact the ability of agencies to run as smoothly and efficiently as needed. In a recent interactive discussion on the topic, no single issue stood out as dominant. Nearly two-thirds were evenly split between either rider wait times or too many ongoing projects as their leading challenge (29% each), while others felt an insufficient operating budget (24%) or workforce shortages (18%) were obstacles to achieving peak performance.

With these issues in mind, Enghouse Transportation’s Toofan Otaredian and Jeff Glatus addressed how introducing an Automated Fare Collection Solution can help transportation agencies alleviate constraints and create a path for higher revenue growth, improved employee satisfaction, and rider retention.

The State of Public Transit for Riders and Employees

Safe, reliable, and punctual public transit has long been a linchpin of society in Asia and Europe, and is receiving increasing attention in North America, thanks to a growing focus on reducing the environmental impact of transportation, said Otaredian, Enghouse Transportation Managing Director.

Drawing upon his decades of industry experience, Otaredian noted companies like Amazon, Apple, and Uber are further shaping rider expectations for convenience and transparency — especially regarding the payment process. “The transit industry can lag behind no longer,” he told attendees of the Enghouse webinar, The Modern Fare Collection System. “The successful transit agency is the one that creates a smooth, convenient, reliable process for payment, which in turn highly contributes to the overall customer experience in transit.”

Transit employees also feel the impact of inefficient payment methods that exacerbate other workplace stressors, such as the aging workforce, noted Glatus, U.S. National Sales Manager. For example, a survey of 190 agencies by the American Public Transportation Association (APTA) found 96% are experiencing workplace shortages. In addition, the impending retirement of baby boomers is particularly impacting transit, where workers aged 55 and over make up 43% of the employee population versus just 24% in all other industries combined.

Along with the “tremendous amount of stress” brought on by workforce shortages, shortfalls in agency budgets, reduced ridership, and fewer resources to handle ongoing projects are all impacting transit employee and rider satisfaction levels. Fortunately, automated fare collection can provide some relief, said Glatus.

What is Automated Fare Collection?

The chief constraint to maximizing revenue during peak morning and afternoon rush hours is the bottleneck a slow payment process can create. Ideal throughput should be in the range of 0.5 to 0.8 seconds. Still, complexity in fare calculation due to factors like location, trip trajectory, commuter pass type, or pay-as-you-go complications creates tie-ups during these critical revenue-generating hours, according to Otaredian.

“Coping with this complexity within a very short timeframe — speaking about a fraction of a second — is the main challenge of the transit agency in Fare Collection,” he said.

With conventional ticketing, the driver may execute the sales process by handling fare collection within the vehicle. However, this puts trip punctuality and even driver safety at risk. Or paper ticketing removes the point of sale from the vehicle but also has the disadvantage of costly sales and service infrastructure.

Automated Fare Collection (AFC) is different. What began with Closed Loop ticketing through tapping or swiping smart cards on a payment device — and is still the dominant payment technology worldwide — is evolving into Open Loop ticketing. Open Loop ticketing uses the rider’s credit card or smart device connected to a bank or credit account for payment.

According to Otaredian, Open Loop ticketing has all the advantages of the Closed Loop format without any of its disadvantages. While Closed Loop tickets are accepted only in transit and require the user to carry a card pre-loaded with enough balance to get them from here to there, Open Loop is accepted almost everywhere, already in the user’s pocket, and connected to their financial account so the rider will never have insufficient fare.

Additionally, an Open Loop has the added value of enabling fare capping that automatically gives customers a best-fare guarantee.

“The good thing is, however, Open and Closed Loop technologies are different, they can coexist,” said Otaredian. “An agency can have both payment methods in use at the same time.”

Benefits of AFC for Riders

As consumers in general, riders are already increasingly used to using Open Loop technology throughout their everyday lives, Glatus pointed out. Specific AFC transit benefits include:

Faster boarding. No delays due to insufficient funds or searching for a lost card.
Increased purchasing convenience. No need to connect to the transit system’s proprietary payment network or worry about not having enough money to cover a trip.
No ambiguities in fare calculations and full transparency. Fare capping ensures rides will not be overcharged.
Access to travel and fare history. This is especially helpful for riders who may need to create an expense report for work.
Improved punctuality of transit services. No delays due to a malfunctioning coin collector or riders struggling to determine the correct fare.
Germ safety. Contactless payment means no hand-to-hand exchanges necessary.

Benefits of AFC for Transit Employees

Transit employees also benefit from the introduction of AFC. Otaredian provided several examples:

Takes agencies out of the cash collection and payment processing business. Executing financial tasks and handling cash are top sources of transit employee dissatisfaction.
Improved safety and security. Removing cash handling from vehicles reduces aggression against drivers and increases safety, particularly during late-night or remote operations.
Allows drivers to focus on customer trip safety and punctuality. Drivers are not distracted by or slowed down by payment needs and issues.
Increased morale. Customer service representatives can conduct thorough analyses of any issues that may arise without needing to rely on customer information and potentially negative interactions. App data storage also offloads a large percentage of customer service questions from the worker.
Improved retention and recruitment. When drivers feel more secure, their job is more fun, Otaredian said.

Benefits of AFC for Agencies

AFC has three key benefits for agencies: increased revenue, better cost savings, and improved quality of services. How? Faster transactions reduce dwell time and draw in more riders, and there is less (or no) need for costly ticket vending machines, Glatus pointed out.

Rider data collection with each tap of a payment acceptance device also enables agencies to monitor rider behavior and use patterns and adjust their programming accordingly. “You could even look at commercial arrangements with retailers to offer loyalty programs based on a pattern of riding,” Glatus added.

Improvements in on-time performance, less maintenance-requiring equipment, and fewer customer support center calls all help to reduce workload stress and provide agency benefits.

Is It Difficult to Transition to an AFC?

When asked what concerns they may have about transitioning to an AFC system, 40% of attendees cited the cost of the project, followed by compliance (20%), and rider response (16%). Length of transition time or not knowing where to start tied at 12%.

Otaredian addressed each concern:

Length of transition time. The implementation of AFC could be fairly quick if an agency stays close to standard solutions. The two-step transition process includes:
- Installation of the validator paths, which are the customer-facing devices on board or on platforms.
- Configuring the back office to apply fare policy and business rules during AFC transactions.
Cost of the project. Government funding may be available to help defray expenses. For example, the California Department of Transportation’s California Integrated Travel Project (Cal-ITP) helps agencies with the RFP process and federal funding for project implementation.
Cal-ITP’s expert-approved, rigid compliance requirements and processes are available to other states as a model.
Rider response. Because Open Loop technology can coexist with all existing payment methods, there is less impact on the rider as they have time to adjust to the new solution.

“Open Loop AFC is not a technology push, but rather a market pull,” said Otaredian. “The solution proves itself in practice by the customer instead of imposing the solution upon the customer. And, from experience in other markets, especially the European market, we see that the adoption process would be very quick because the advantages are very appealing to the customer.”

What to Look for in a Vendor

Despite the growing challenges facing their transportation agencies, most attendees (41%) do not have a response plan in place to tackle them. Others are looking to take action in the next 6-12 months (29%), already have an active project (24%), or have a plan but no timeframe for implementation (6%).

For those thinking about introducing AFC, Otaredian said, “We strongly believe that there is no reason to wait, as waiting will only correspond to not benefiting from the advantages.”

Glatus had several recommendations on what to look for in an AFC vendor. They included:

Global experience in advanced transportation markets. Vendors who’ve already proven their abilities in the European market, for example, can demonstrate performance at the highest level.
A revenue-sharing model. When the vendor makes its money by sharing a percentage of each fare, it requires no upfront costs for the agency.
Commitment to seamless integration. Things run smoothly when there is no need to remove existing payment methods, and the vendor can integrate with the already available options.
Cal-ITP approval. California is leading the way with AFC. By working with one of its already-approved vendors, agencies will know the vendor is already tested and vetted.

By implementing Open Loop AFC, “we believe the agency has nothing to lose, but only gain,” said Otaredian. “The loss would be if they hesitate because every day that they hesitate to use or implement Open Loop AFC is a day that it could not benefit from its very important benefits.”

You can view The Modern Fare Collection System webinar on-demand here.