Unbanked Transit Riders & Smart Card AFC Systems Transportation Agency Perspective

Jake Avidon, Metropolitan Transportation Commission February 2008

Smart Card. Smart Travel. A Little Background

• TransLink® is the Bay Area’s regional smart card fare payment system • MTC is implementing TransLink in partnership w/Bay Area transit agencies • TransLink is operating on 2 transit systems and will expand to 20+ by 2011 • White paper also includes input from Doug Deckert at WMATA and data provided by staff from Atlanta, Boston, Chicago, LA and Seattle

2 Smart Card Program Goals

• TransLink®, SmarTrip®, others have common goals: – For agencies – reduce fraud, reduce AFC maintenance costs, generate more detailed ridership data, reduce customer service issues related to fare payment, increase float balance, improve boarding speed, etc. – For transit riders – convenience, security, reliability, faster boarding, less hassle, new technology • Automatic loading of value – Autoload – is one of the keys to program success With Autoload, – Most convenient option for loading value cardholders receive value directly from the – Ensures patron always has value on-board reader – Creates predictable revenue stream for agencies – Requires minimal add’l equipment beyond the card reader – Creates potential for reducing AFC equipment needs

3 The Importance of the Unbanked Market Segment

• Autoload requires a link from credit card or bank account to the smart card – No bank account? No Autoload. No exceptions (yet). • Before Autoload, banking status was not a focus for transit agencies • But, unbanked persons are a significant market for transit in urban counties

San Francisco Bay Area Contra San Santa Counties Alameda Costa Francisco Clara Total Lower Income Transit Using 75,999 22,770 56,978 11,473 167,220 Households Lower Income Transit 28,172 7,337 20,948 4,422 60,879 Households without Bank Accounts (estimate) % Without Bank Account 37% 32% 37% 39% 36% • If TransLink® can’t reach all market segments, transit agencies will maintain existing fare media, and the the smart card program’s potential is unrealized.

4 Access to Autoload Isn’t the Only Challenge in Reaching the Unbanked

• Most US transit smart card programs are charging $5 for the smart card, which is the first time transit agencies have charged for the fare media itself – Charging for the cards allows transit agencies to offer negative balance features – Transit agencies want customers to value the card, and charging for the card is one way to encourage that – Boston’s CharlieCard program has given away more than one million cards, WMATA has given away 50,000 cards to social service agencies following recent fare increase, and TransLink® will give away about 250,000 cards • But, giving away cards is costly and doesn’t necessarily build market share • Marketing – Promoting a new smart card to the unbanked rider segment might require very different strategies than the tactics used to reach other riders • TransLink promotes Autoload as the most convenient way to add value • TransLink waives the $5 card purchase fee for Autoload customers

5 How Are Transit Agencies Trying to Address This Market Segment?

TransLink Point of Transit Agency Sale Terminal for Use Ticket Office at Retailers Sales Terminal

• Traditional approaches to vending fare media: – Retailers, ticket offices, in-station equipment • Advantages of maintaining traditional approaches In-Station TransLink – Familiarity to transit riders; capability to vend cards Add Value Machine • Disadvantages (AVM) – Cost (sales commissions, equipment, fees, telecom) installing/maintaining new equipment, training, getting retailers to sign up for a new program

6 The Traditional Approaches Are Both Essential to the Smart Card Rollout and Extremely Challenging

• Transit agencies plan to invest heavily in point of sale distribution locations

# of Current # of Planned Card Sales at Reload Program City/Region Outlets Outlets Outlets? Capability? CharlieCard Boston 170 500 Yes Yes ChicagoCard ® Chicago 49 65 Yes Yes ORCA Seattle 0 140 TBD Yes SmarTrip® D.C./Maryland 0 500 Yes Yes TAP Los Angeles 0 500 Yes Yes TransLink® SF Bay Area 80 400 Yes Yes

• In the Bay Area, transit agencies resisted moving forward until enough outlets in the right places were set up. Agencies also pressed for name-brand stores. • WMATA’s recent fare increase placed additional attention on quickly implementing the retail network

7 More on the Challenges of Maintaining Traditional Sales Outlets

• Operating the retail network is more expensive per transaction – (All info is forecasted for TransLink ® at full implementation) Autoload Retail Outlets Forecast Monthly Volume of Transactions 71,000 41,500 Average Load Amount (Varies by Agency) ~$35 ~$20 Forecast Cost to Operate per Txn (includes $1.82 $2.60 management fees, credit card fees, etc.) • Other challenges with implementing a retail sales network – WMATA’s POS terminal requires analog communications – WMATA doesn’t allow payment of a sales commission to participating stores – Resistance to installing new countertop terminal specific to the transit card – Getting stores to participate in automated financial settlement – Keeping the device working and the staff trained

8 Lessons Learned & Conclusions from the Transportation Agency Point of View

• Maintaining sales outlets for card and value sales is a required component for TransLink®, SmarTrip® and others – Ensuring access for all riders is a driving factor – Agencies and customers realize the greatest benefits from the new programs when cardholders choose Autoload – MTC estimates that unbanked households account for about 10% of Bay Area transit ridership • Even though the sales outlets are challenging to establish and maintain, there is no current alternative • Transit agencies could limit their investment in sales The SmarTrip® POS outlets if alternative approach(es) existed for enabling all Terminal riders to use Autoload • Promoting the new cards to unbanked riders requires changes in marketing

9 Questions