No open payment for Toronto?

Steve Munro reports that as part of a larger deal between the Province of Ontario and the City of Toronto (which controls the TTC), the TTC will abandon its controversial effort to implement open payment, and instead adopt the PRESTO system, which was commissioned by the province, and is being managed by Accenture with equipment from Thales.

PRESTO is a sort of curious system; as far as I can tell there are no ticket vending machines (although online reload is offered), and the rollout has been sluggish so far. That said, it represents the best shot the TTC has at modernizing a fare collection system where the state of the art is considered to be a monthly pass with a fancy hologram and a bus farebox designed to detect counterfeit tokens. All of the engineering work for PRESTO has been done already—even the work necessary to deploy PRESTO at TTC stations. All that was lacking before was the money to actually purchase and install the hardware. Now, though, thanks to the new agreement, someone will foot the bill (it’s not clear if it’s the TTC or the province) and get the work done. With luck, in a few years’ time, this will mean the end of the token in one more city.

I consider this to be of particular interest because the situation in Toronto has been one of the few in which there has been an opportunity for real debate about the merits and drawbacks of open payment. Torontonians raised many concerns over the TTC’s push for open payment. The province, having already invested heavily in PRESTO, pushed for the TTC to adopt PRESTO system-wide, sometimes using forceful language to that end. In other cities, open payment has simply been presented by transit agencies as a fait accompli, even as they are themselves unable to provide any real details. As David Smith, director of program services for PRESTO, put it in an interview:

New York has been in a pilot since 2006 and still there’s no firm time for them to roll out an open payment. They’ve not in any way been able to articulate a cost. Currently Mastercard is funding all of it.

That said, I would be hesitant to treat this as a wholesale condemnation of open payment; the architecture of the PRESTO system is such that it could be adapted to accomodate open payment at some time in the future. Moreover, the argument in favor of PRESTO (and against the TTC’s open payment system) was never that it wasn’t open payment, but rather simply that PRESTO was already there—in short, that there was no need to deploy two new fare collection systems in the same city at the same time.

Finally, if there was any lack of evidence that Adam Giambrone was unfit to serve as chairman of the TTC, consider this quote in support of open payment, from an interview with the CBC:

Speaking to CBC’s Metro Morning, Giambrone said transit systems in cities like London, England, use both a Presto-style smart card service and an open payment system that accepts credit and debit cards.

That was in August 2010, and at the time it was patently false. In fact, it’s still false today. TfL has only just released its plan for open payment, and there is not yet a single city with an existing electronic fare collection system which has also deployed open payment in a non-pilot system. New York has come the closest; the UTA‘s system, though fully deployed, doesn’t count because it was a greenfield project.

4 thoughts on “No open payment for Toronto?”

  1. I wish I could begin my response with a more collegial, positive statment, but your ignorance (as evidenced my the uninformed statements you make in this post) makes this impossible. You clearly don’t know what you’re talking about when it comes to fare collection in general, much less about open payment technology.

    You speak of open payment technology as if it’s some newly-developed, unproven technology. It’s a payment system. The very same payment system (off the shelf point-of-sale devices, software, hardware, etc.) that is employed at every major retailer throughout the world. Hardly an emerging technology. Hardly unproven.

    Then yo site the fact that no major transit system has implemented open fare technology (as if this is some indication of prudence on their part). Are these the same transit properties that still employ paper tickets and tokens, or spent hundreds of millions of dollars on customized ticketing systems? Hardly an economically-minded, or efficient, industry.

    I don’t fault you for trying to discuss the topic. But, when you write about a topic, you should be engaged enough to write from an informed position. To write objectively. Clearly you have an ax to grind with open payment technology in transit, which makes everything you write worthless and biased.

    1. Mark,

      It is wholly inappropriate of you to call me ignorant; ad hominem attacks are not welcome here.

      You are correct that open payment for transit is based on the same transaction processing networks used for credit card processing today. However, transit applications demand response times (on the order of 300 ms; 500 ms at the most) and transaction volumes which are unlike those found in a retail environment currently. Contactless payment itself is not an emerging technology, but its use in transit applications is. The lack of full-scale deployments bears that fact out.

      I haven’t got ‘an axe to grind’ with open payment; on the contrary, I think it’s a development which has the potential to bring substantial convenience to mass transit riders. That said, there are still serious unanswered questions about open payment for transit, and its viability and cost-effectiveness. It is essential that transit agencies which intend to implement open payment address those issues beforehand. In a previous discussion on the subject, another commenter remarked on the fact that many transit agencies are presently “held over a barrel” by AFC vendors like Cubic, who (I agree) charge exorbitant fees for even small change orders. But if those same agencies move to open payment, they may well end up being held over a barrel by card issuers and the payment card industry. The economic argument for open payment simply isn’t clear yet. Some models forsee shifting some of the costs to riders—reload fees for prepaid cards, for example. These are changes which need to be given thorough consideration; we must not adopt open payment simply for the sake of modernity, nor simply because it is open.

  2. My apologies for personalizing my comments. However, when you choose to write about a topic in a public forum, you have a responsibility to discuss your chosen topic acurately.

    For example, in your response, you indicate that the “economic agrgument for open payment simply isn’t clear yet.” Please take a look at the publically-released RFP documents for both the Toronto Transit Commission and the Chicago Transit Authority. These documents require (not propose, but require) bidders to pay for all upfront costs associated with installing a new open payments system, as well as operate the system for a multi-year period at a lower cost than their current cost of collecting fares. According to the TTC’s procurement website, they received a bid from ACS Transportation meeting these requirements. And, according to press releases from the CTA, they received multiple bids from private sector firms meeting these requirements.

    As for your comment that these systems would somehow shift costs to riders (e.g. reload fees associated with prepaid cards), these same RFP documents require that no fees be levied when using prepaid cards for transit fares. If you think about it, this makes complete sense for prepaid card providers. Their biggest challenge is marketing their cards and promoting widespread usage. Partnering with transit operators (a service on which a large number of consumers depend) can be an effective marketing and promotion strategy. They can easily forego their fees for transit usage because they are betting consumers will use the cards frequently outside of transit.

    As for transaction speeds, New York MTA’s trial, which concluded in November 2010, proved the feasibility of this technology in a production environment (across three seperate transit agencies providing bus and rail services in arguably the most challenging urban environment on Earth).

    This information is all public. Someone like me with a part-time interest can discover it. Why can’t you? Just because you are uninformed (needlessly so), doesn’t mean the misinformation you help propulgate is accurate.

    You, however, did get one fact correct. The supplier community for “traditional” AFC systems is extremely concentrated. This leads to the transit “over a barrell” dilemma you highlighted. Conversely, the supplier community for payment system equipment and services is highly diverse and extremely competitive. Further, payment system equipment must be “certified” by the payment networks (VISA and MasterCard), which simply means they must meet the standards published on the payment network’s websites. This effectively removes any product differentiation and essentially commoditizes the equipment and services, which keeps downard pressure on equipment and service pricing. As a result, I would argue that transit operators – for the first time since automating fare collection – will be able to find real economic efficienies. Then perhaps they will stop going to their riders in tough economic times with the false choice of either cutting service or raising fares!

    1. Mark,

      I see a fundamental difference of opinion here, and I don’t know how productive it will be to continue this discussion. That said, the tri-agency trial in New York was only a pilot program, with transaction volumes far below what the MetroCard system handles currently. I agree that as a proof of concept it is promising. While we’re on the subject, though, just how fast were they processing transactions in New York? I have heard that it was slower than the 300 ms standard specified by WMATA for its New Electronic Payments Program.

      As to cost models, you cite the RFPs for the CTA and TTC; in response I would cite the on-going procurement process for WMATA’s New Electronic Payments Program, which may not end up providing the same guarantees. The fact that two open payment RFPs happen to be structured in a way that is advantageous for the transit authority and riders (presuming the bidders live up to expectations) is not an intrinsic property of open payment. An RFP for a conventional AFC system could be structured in the same way. As I have pointed out with respect to WMATA, open payment procurements can also be structured in ways which are less advantageous to the transit authority.
      To the extent that there are differences in cost between open payment systems and conventional AFC, those cost differences remain valid regardless of who bears the burden. Some transit systems will end up bearing the burden of deploying an open payment system themselves, and for those systems—particularly the ones which have an existing electronic fare collection system—I stand by my argument that open payment has yet to prove itself. Much of this hinges on the cooperation of banks, payment networks, and card issuers, and aside from cases where they are contractually required to cooperate, nothing forces them to offer transit agencies or their riders any advantageous treatment.

      If I’d made any argument about the financial impact of open payment for the TTC or CTA, I could see you accusing me of spreading misinformation. But I’ve said no such thing—in fact, there isn’t a single post on this site about the CTA. Beyond that, paying for an open payment system is just one of many concerns over open payment which exist—and I will readily concede that not all of those concerns may be valid for every open payment implementation.

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