Alliance Activities : Publications : Parking

Smart Cards and Parking

Publication Date: January 2006

Executive Summary

Over the last decade, advances in technology have fueled major innovations in electronic payment strategies. These strategies are revolutionizing the way payments are made in a variety of environments including retail, banking, and transportation. Transportation in particular has witnessed large-scale investment in the electronic payments infrastructure, with a variety of such programs now reaching the launch stage.

Smart cards are playing an integral role in these new payment strategies. Smart cards provide increased security, enable more distributed processing, and provide a variety of communications options. Smart cards that support contactless communication are becoming more prevalent in mass transit programs and are now rapidly gaining favor with financial payment card issuers and associations. Contact smart cards are seeing continued use in European and Asian financial payment card programs and are also being used for domestic security, on-street parking, and other niche applications.

In the United States mass transit sector, the combination of the fare collection infrastructure life cycle and the introduction of new technologies has resulted in 18 cities awarding over $1 billion in contracts for regional transit payment systems that use contactless smart cards as the primary form of fare payment. A review of the parking market indicates that a similar environment is present, as aging first-generation automated payment systems begin to be replaced. The replacement process may be accelerated as changing credit card regulations, increased security requirements, and new market data on the economic benefits of non-cash payment methods create more compelling requirements for parking facility owners and managers to invest in new payment systems.

Similar changes have occurred in the road tolling industry where operators seeking to eliminate the problems associated with coin processing have moved toward high-speed electronic toll collection using long-range radio frequency (RF)-based transponders. These systems have illustrated consumer acceptance of electronic pre-payment systems and have established new models for customer service and support that have been emulated in other markets. These longer-range RF-based electronic toll collection systems are also being used for some parking applications; however, the Smart Card Alliance believes that the longer range, limited functionality, and lack of security makes the use of this technology inappropriate for many payment applications.

In the parking market, the rationale for electronic payment and the preferred technology vary by operational segment. In the on-street market, the historic prevalence of low-power single-space meters led to the use of contact smart cards as the only form of electronic payment. As cities are increasingly embracing the European model of more powerful multi-space metering systems, opportunities are created for the use of contactless smart cards and online payment processing for credit and debit cards. In the off-street segment, read/write contactless smart card technology represents an attractive alternative to bar code and magnetic stripe-based entry/exit tickets; in addition, the introduction of contactless credit cards by the financial industry provides a powerful tool for credit-card-in/credit-card-out systems.

Smart cards have been used in the parking market for several years, most commonly (as noted above) in on-street parking. These programs met with limited success due to a variety of operational challenges: patron acceptance, distribution, convenience, interoperability of systems, and program support costs. Most city meter card programs depended on disposable smart cards that were sold through selected retail merchants. Parking patrons were forced to seek out these merchants both to acquire the initial card and to replace the card once its value was exhausted. In addition, due to lack of standards, smart cards were not interoperable across systems and metering technologies. The parking card could not be used consistently throughout a region. As a result, patrons did not find that the increased convenience of using a card for parking payment justified the effort of acquiring the card; however, with on-street parking rates on the rise, coins will become a decreasingly viable payment mechanism.

Transit payment programs using contactless smart cards address these issues through the establishment of standards, broad regional collaboration of agencies in adopting a common system, establishment of regional customer service operations, and the use of reloadable cards. As a result, programs like SmarTrip® in Washington, DC, are seeing over half their payment transaction volume moving to the smart card.

Many key benefits are being achieved through the use of smart card technologies including:

The transit industry is leading the way in integrating contactless smart card technologies into parking applications. Transit operators worldwide (e.g., Washington, DC, Philadelphia, Atlanta, Hong Kong, Lyon, France) are implementing parking solutions based on contactless smart card technology. The international standard ISO/IEC 14443 is being used by both the transit industry and financial industry for contactless smart cards. Transit agencies are also collaborating at a national level to create technical standards aimed at system interoperability. Multiple national standards are nearing completion in different parts of the world bearing striking similarity to each other in terms of approach and content. Within the United States, the American Public Transit Association has sponsored application-level and inter-system messaging standards allowing systems provided by disparate suppliers to be interoperable, with final standards expected to be published in 2006.

All of this activity paves the way for the parking industry to leverage the broader transportation and payment card industry initiatives and develop solutions for the challenges previously experienced in the use of smart cards. Through industry groups like the Smart Card Alliance Transportation Council, parking facility owners and managers and parking equipment vendors can be exposed to industry developments and establish the relationships needed to benefit from them. By participating in industry initiatives, the parking industry has the opportunity to influence the development of standards and commercial structures aimed at facilitating regional, and ultimately, national transportation payment networks. Without such participation, parking owners and managers face the risk of having such standards imposed on them without their involvement in the development.

The Smart Card Alliance urges parking industry participants to join these transportation industry initiatives and take advantage of the substantial benefits being reaped by counterpart transportation market sectors.

About the White Paper

This white was developed by the Smart Card Alliance Transportation Council to provide the parking industry with an overview of the technology and trends in the smart card marketplace and to provide the transit industry with an overview of the parking industry market and use of smart cards. The white paper is not intended to provide detailed implementation guidance for smart cards programs, but does discuss both the benefits and challenges of implementing smart cards in transportation applications and provides profiles of successful transportation sector smart card implementations. White paper topics include:

About the Transportation Council

The Transportation Council is one of several Smart Card Alliance Technology and Industry Councils, a new type of focused group within the overall structure of the Alliance. These councils were created to foster increased industry collaboration within a specified industry or market segment and produce tangible results, speeding smart card adoption and industry growth.

The Transportation Council is focused on promoting the adoption of interoperable contactless smart card payment systems for transit and other transportation services. Formed in association with the American Public Transportation Association (APTA), the Council is engaged in projects that support applications of smart card use. The overall goal of the Transportation Council is to help accelerate the deployment of standards-based smart card payment programs within the transportation industry.

The Transportation Council includes participants from across the smart card and transportation industry and is managed by a steering committee that includes a broad spectrum of industry leaders. Transportation Council participation is open to any Smart Card Alliance member who wishes to contribute to the Council projects. Additional information about the Transportation Council can be found here.