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Flexible fare management can take cost out of fare collection.
Fare collection can be a revenue drain for public transit agencies. It’s costly to manufacture, distribute, and track passes, tickets, tokens or smart cards—not to mention the cost of fare evasion. Through the Transit Fare Systems Survey, Accenture learned that many have made significant investments in Automated Fare Collection (AFC) systems in an effort to reduce fare collection costs, but challenges remain.
The future of fare collection will include flexible payment systems for public transit agencies that help meet customer expectations, lower operational costs and improve operational efficiency.
To understand how transit agencies are grappling with the fare collection challenge in North America, Accenture conducted the Transit Fare Systems Survey, which included interviews with more than 30 North American public transit agencies and transit sector consultants.
The survey indicated that many have made significant investments in Automated Fare Collection (AFC) systems in an effort to reduce fare collection costs. In fact, 50 percent of survey respondents have deployed, or are in the process of deploying, a new fare management system. Nearly 30 percent see a change on the three to five-year horizon. However, it is clear that these smart systems are viewed as both an opportunity and challenge. Millions of dollars have been spent on implementation, yet risks have already been identified around the rising cost of maintaining these fare management systems moving forward.
Back-office interoperability and commercial off-the-shelf software can reduce costs in key areas including:
System upgrades – Agencies with interoperable systems can seamlessly integrate new applications and upgrade the system to remain compliant with financial regulations.
Management – Transit agencies can significantly reduce demand for card issuance and management operations as this responsibility is passed onto the financial institutions, or is replaced with a mobile application. Also, the shift to “pay as you go” or pre-payment using self-service channels reduces the need for agencies to operate costly retail points of sale and vending machines.
Regional integration – Multi-vendor supply can simplify the integration between service providers, both from a customer perspective as well as for back-end processes. An open, flexible system can also support operators from other industries such as parking, tolling and other retail channels without the need to reconfigure existing equipment.
According to Accenture’s survey, the most common driver behind a change of fare payment systems is the desire to make buying a fare and traveling on public transit easier. This is coupled with a need to reduce operational and maintenance costs. Other important drivers include a desire to reduce the amount of cash in the system due to breaches in custody, and cash processing costs. At most agencies, the need to replace old or outdated systems was the main impetus to consider modernization.
The investments required to implement fare collection systems require that those systems avoid obsolescence and have long life cycles. Agencies can extend their investments and lower the total cost of ownership by breaking the proprietary link through a single device supplier and its associated software. This can be achieved by enabling multi-vendor integration and by selecting a configurable solution that can keep pace with changing business needs—such as introducing new customer payment methods, scaling operations, or even expanding to broader applications outside the public transit industry.
Transit agencies can lower their total cost of ownership and establish long-term fare collection flexibility by implementing a solution that removes the dependency between device suppliers and fare management software through the integration of multiple hardware suppliers.
Multi-vendor integration. For transit agencies looking to cut fare collection costs, multi-vendor integration is important. It can help to reduce fare management costs up to 50 percent with a 3 to 5-year payback on the capital investment.
Open and mobile payment. According to Accenture’s survey, many public transit agencies are exploring open payment and mobile solutions because of their customer experience impact. Mobile and open payment have the potential to greatly improve customer adoption.
Commercial off-the-shelf software. Commercially available software packages enable agencies to select best-in-class software for each component of the back-end system. Replacing legacy software can help to improve and automate existing processes.
Some respondents expressed fear that agencies do not have enough employees who understand new payment systems that are evolving rapidly and/or that they are losing tech-savvy staff to the private sector.
According to the survey, approximately 42 percent said that by outsourcing, they took advantage of outside expertise and used internal resources more efficiently.
January 29, 2014
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