Economics of electronic card systems for public transportation

An electronic card system for public transportation can automate trip tracking, fare processing and accounting. A system also can offer other intelligent transportation functions, can accept credit, ATM and EBT cards to pay fares and can be used to manage third-party support, such as by major businesses enroute, states and local governments, and social service agencies. Our latest economic study(1) suggests that a cost-effective strategy for acquiring and financing such electronic card systems could begin with magnetic stripe and smart (integrated circuit) technologies of minimum-to-medium functionality. If there were no benefits--an unrealistic, worst case, since no one would buy a system unless it produced benefits--an investment of not more than $6-15 million should finance this range of configurations, costing $29-68 million, that can serve the breakeven markets. The breakeven markets for the configurations are the minimum market sizes that can deliver reasonable return at affordable risk. The markets range from 5 million to 15 million people (2-6% of the national market). These maximum breakeven requirements should dramatically decline if benefits are taken into account, e.g., are reinvested during implementation. For example, card systems serving 100% of the U.S. market should become self-financing if annual benefits reach $20-80 million, i.e., 0.05-0.22% of the annual cost of the national transportation system. In addition, the costs of implementing the range of card systems in three kinds of service areas as part of the national breakeven markets are estimated. A rural area of 29,000 population might cost $170,000, small city or county of 200,000 population might cost $1.2 million and an urban area of 1.2 million population might cost $7.0 million.