Report to/Rapport au :

Transit Committee

Comité des services de transport en commun

and Council / et au Conseil

12 May 2009 / le 12 mai 2009

Submitted by/Soumis par : Nancy Schepers, Deputy City Manager/Directrice municipale adjointe,

Infrastructure Services and Community Sustainability/Services d’infrastructure et Viabilité des collectivités 

Contact Person/Personne ressource : Alain Mercier, General Manager / Directeur général,

Transit Services/Services du transport en commun

(613) 580-2424 x 52271, Alain.Mercier@ottawa.ca

REPORT RECOMMENDATIONS

That Transit Committee recommend that Council:

1.         Direct staff to negotiate a revised commission structure with Presto Smartcard to enable the purchase of Smartcard fares using credit cards.

2.         That this commission not exceed two percent.

RECOMMANDATIONS DU RAPPORT

Que le Comité du transport en commun recommande au Conseil :

1.         de demander au personnel de négocier une révision de la structure de commission relativement aux cartes à puce Presto afin de permettre l’achat de cartes à puce par carte de crédits;

2.             d’établir la limite maximale de cette commission à deux pour cent.

BACKGROUND

On September 6, 2006, the Smartcard Fare System Report, ACS2006-PWS-TRN-0004, was presented to the Transportation Committee outlining the concept and functional requirements for a Smartcard fare payment system for OC Transpo.  On September 27, 2006, the report was approved by Council, and, as part of the 2007 budget, $22 million in capital authority was approved.

One of Council’s conditions for an agreement to join the Smartcard fare payment system project, as organized by the Ministry of Transportation, GO Transit and GTA Fare System partners, was the “successful negotiation of central system fees to enable OC Transpo to reduce the overall commission to approximately one per cent.”

DISCUSSION

Since the inception of the Smartcard project, further market research has been conducted and discussion between Smartcard transit partners has occurred.  The consensus is that purchasing trends of the public indicate that a greater number of individuals are selecting online tools to conduct their financial transactions, including online banking, payment of bills, and retail purchases.  Online transactions are quickly becoming the primary method of making payments and purchases due to the convenience, efficiency and security features of this process.  With these types of transactions, customers usually favour payment by credit card.  

Presto Smartcard charges two per cent commission on all transactions to all transit participants of the Presto system (GTA/GO Transit), including credit card payments.  Credit card fees are currently 1.75 per cent on all credit card transactions.  Debit card transactions are at a significantly lower rate.

Transaction processing by dollar volume in Ottawa is currently distributed in the following manner:

• 62 per cent of revenue processed by third party vendors at a one per cent commission;

·         18 per cent of revenue processed by OC Transpo Sales and Information Centre (OC Transpo’s cost) with no commission paid (credit card charges 1.75 per cent); and

·         20 per cent of revenue processed via OC Transpo’s EcoPass (OC Transpo’s cost) with no commission paid.

In light of current trends regarding online purchasing behaviour of our customers, it is anticipated that nearly 50 per cent of our customer driven transactions would migrate from OC Transpo’s third party vendors to Presto’s online solution.  This creates an added dimension to OC Transpo’s customer service by providing a convenient and secure method of purchasing the Presto card and loading up transit fare products or E-purse amounts of their choice. The commission that Presto requires for administering the credit card program would result in a net increase in costs (approximately $400,000 or 0.25 per cent on overall revenue), which would be offset by the following:

• Reduced cost of the production and distribution of materials to more than 400 vendors.
• Increased ridership, as infrequent riders embrace a more convenient method of purchasing fare media.
• Convenient auto-reload and “top up” using credit card deductions, which would ensure a long-term continuous commitment from current and future riders.
• Reduced risk for default credit card payments as Presto assumes the risk as opposed to OC Transpo carrying the settlement risk on behalf of vendors.

Conclusion

Should Council opt to continue with the one per cent commission structure for Presto central system credit card transactions, the possibility of allowing customers to purchase OC Transpo products online using credit cards would be eliminated by Presto.  This significantly reduces the efficiencies and customer service components of the system by driving our customers to physical locations to make their fare purchases.  Removing the one per cent commission condition from the equation allows OC Transpo to negotiate other commission structures with Presto, not exceeding two per cent, while allowing online credit card purchases.

CONSULTATION

There is no consultation required at this time.

LEGAL/RISK MANAGEMENT IMPLICATIONS:

Legal implications have been reviewed by Legal Services.  There are no direct legal implications resulting from the amendment. 

FINANCIAL IMPLICATIONS

Financial implications have been reviewed by Financial Services and are outlined within the report.

DISPOSITION

Upon Council approval, staff will work with the Presto System team to negotiate an agreement and to evaluate next steps.