Ohio Transit Agency Expects Significant Revenue Loss as It Builds Equity with Fare Capping

The Central Ohio Transit Authority, or COTA, officially launched its new digital-payments service Monday, including a fare-capping feature that the agency estimates will cost it $1.8 million per year in lost fare revenue, the agency confirmed to Mobility Payments.

COTA, which serves Ohio’s largest city, Columbus, and the surrounding metropolitan area, launched an account-based ticketing system that enables the fare-capping feature. Customers also can reload their accounts with cash at more than 350 retail outlets, then pay with QR codes on their smartphones or with contactless cards via validators installed on 320 fixed-route buses.

The agency had soft-launched the new system Oct. 17, which cost it $1.5 million upfront, mainly for installing new validators, along with monthly fees going forward to plug into a software-as-a-service platform from UK-based Masabi.

With the daily and monthly fare capping, COTA estimates that a number of its customers will save hundreds of dollars each year, especially those who find it difficult to pay in advance for period passes.

With the new service, the agency will cap daily fares at $4.50 and monthly fares at $62, the same prices it charges for daily and monthly prepaid passes, respectively. With the caps, along with a pay-as-you-go service, once customers reach those amounts, all additional rides are free for the remainder of the periods.

COTA’s estimate of $1.8 million per year in lost fare revenue would have amounted to nearly 10% of all of agency fare revenue for 2019–its last pre-Covid year on record.

New ‘Equitable’ Fare Policy
A COTA spokesman told Mobility Payments that the fare-capping feature will help the agency offer more equity for its customers, especially low-income people, who end up paying more in fares because they can’t afford the prepaid passes.

The new fare capping is an integral part of a more “equitable” and simplified fare policy that the COTA board approved in late September. Besides the capped fares, it also eliminates a 75-cent upcharge on rush hour lines and allows customers to travel round trip on buses on one fare within two hours, ending a restriction that limited these trips to one way.

“It is something we have to do since some of our customers are paying significantly more for transit than others,” the spokesman told Mobility Payments. “Often the customers who pay the most are those who can afford it the least.”

He said the agency would “find ways to offset that revenue loss,” and hopes the new system will add some ridership. COTA delivered 19.1 million fixed-route bus rides in 2019, up slightly from its fixed-route bus ridership in both 2018 and 2017, according to the American Public Transportation Association. “We do believe it (digital payments) will encourage customers who are looking for an easier mobile-payment option to try COTA,” said the spokesman.

COTA is not so dependent on fare revenue as some agencies in other states. According to an agency financial report, passenger fares accounted for just 10.2% of total revenue in 2019. Sales tax receipts made up nearly 73% of revenue that year, with federal capital grants accounting for 13.4%. Fares made up an even lower share of total revenue in 2020 because of a sharp drop in fare revenue due to the pandemic.

Agency Drops Existing App
COTA confirmed to Mobility Payments that the agency spent around $1.5 million to implement the Masabi system, most of it paid for with grant funds. The cost was mainly for validators for all of the agency’s 321 fixed-route buses, including for the hardware, installation and training.

Masabi also charges monthly fees for agencies to plug into its Justride platform. According to the spokesman, for this implementation, Masabi is charging a 2% transaction fee, plus 1% of stored value loads used for transactions. In addition, COTA will pay fixed fees of $3,320 per month for validator licenses and $3,650/month for hardware maintenance. That does not include processing and interchange fees when customers use bank cards to charge their ticket purchases.

COTA sells its mobile tickets through the trip-planning Transit app, which connects to Masabi’s ticketing and payments platform through an SDK.

Customers would register their accounts in the Transit app. For customers without smartphones or who don’t want to use them for transit, COTA will issue contactless closed-loop smart cards at its main transit center. Customers can register their accounts there, along with a credit card or bank account for reloads, though they could use cash for the card reloads at retail outlets, if they prefer.

Masabi won the contract from the agency last year, when COTA decided to replace its COTA Connector mobile app provided by U.S.-based Genfare. The agency had only launched COTA Connector in October 2019. The service also enables users to load cash and had earlier allowed them to load passes. They can scan a QR code in the app or use a card on validators. Only 3% to 4% of rides were paid for with the app during a typical month, according to COTA.

“This was to help our customers who did not carry cash but the technology did not advance to offer fare capping or a robust retail network to load funds,” the spokesman said of COTA Connector, which is being phased out.

He noted that Masabi won the bid in part because it “had the best plan for COTA. They have a well-established retail point of sale infrastructure and a good partnership with Transit, which is a popular trip planning app in our region. It has been a good working relationship.”

With the new service, customers can reload at more than 350 retail locations in Columbus and the surrounding county, including some convenience stores and retail pharmacies. They access their accounts with barcodes either in their phones or contactless cards. The retail cash points are operated by fintechs T-Cetra and InComm Payments. Masabi links its platform to these networks, and the transit agency pays a commission of around 3.5% of the amount loaded.

No Definite Goal to Eliminate Cash?
COTA said it considered starting out with visual inspection of tickets in the mobile app, like most Masabi clients do, but decided to launch with full account-based ticketing and validators when the technology was ready and fully installed. Only a handful of Masabi’s more than 100 agency clients for its SaaS ticketing service are using full account-based ticketing.

One of them is another transit agency in Ohio, the Greater Dayton RTA, which as Mobility Payments reported this week, used the fare-capping feature and retail cash reload points to help it accomplish its goal of eliminating cash acceptance on board its buses and trolleybuses on Monday.

This made Dayton RTA one of the few agencies in the U.S. to eradicate cash from its vehicles. Unlike Dayton RTA, COTA does not appear to have a definite goal to eliminate cash acceptance, which still accounts for 35% to 40% of rides on its buses, the COTA spokesman said.

“Ultimately, we plan to move cash off board completely, but that will depend on how quickly our customers adopt the new system,” he said.

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