City and Merchants Try Smart Card Parking

City officials and local merchants in New Haven, CT, are reporting success with the first month’s performance of a new smart card-based payment system for parking and shopping.
newhaven.jpgLaunched in early-May by Parcxmart Technologies, Inc., the company’s offering marks the first smart card payment system in the US targeting parking meters and merchant transactions.

The turnkey system includes a payment platform complimenting Electronic Funds Transfer (EFT) networks, retail merchants, and merchant banks on behalf of municipalities and consumers. Cards are free to consumers at this point, and can be loaded with up to $100 by a network of local merchants that benefit from commissions generated by the dollar value loaded. Parcxmart licensed SmartCentric Technologies International’s E-purse as part of their transaction processing engine.

Currently, nine New Haven Parking Authority garages and lots, and 26 private garages accept Parcxmart Card transactions. They account for approximately 12,000 parking spaces. There are 26 participating merchant locations, and to date, Parcxmart (the direct issuer) has issued 1300 cards. The demonstration’s final key component, 500 card reading meters from Duncan Parking Technologies, Inc., is scheduled to arrive in August. In May, the city of San Jose, CA, launched a similar program with Parcxmart, but administrators are waiting for meters before making an official announcement.
parcxmart.jpgPaul Wessel, New Haven’s director of Parking and Traffic, expects the meters to further boost the program’s revenue. Meanwhile, he notes that the city is enjoying some unexpected benefits “We are marketing this as the ‘New Haven’ card, so we’re branding the city and there’s some real excitement about it,” says Wessel. “We have civic pride going on here and there’s a cool factor that I and Parcxmart underestimated.”

Parcxmart’s financial factor also appeals to Wessel. New Haven will collect 90 cents of every dollar spent on prepaid parking, with the remaining 10 cents going to the vendor. It’s a vast improvement over the previous prepay paper voucher system in which the city collected only 62 cents on the dollar.

New Haven has about 2700 parking meters and Wessel’s department plans on replacing their modular coin mechanisms to accept Parcxmart cards, and raising their total inventory to 3000. Costs for mechanisms vary with quantity, but Wessel expects to pay about $250 per unit. However, the payback will quickly outpace the expense. “The meters typically generate about $1000 per year,” explains Wessel. “And parking violations generate another $1000. We haven’t increased our parking rates since 1972, so this is an opportunity to raise them and take advantage of the new meter’s abilities to adjust rates during certain hours or days.”

Such benefits make a strong pitch for cities, according to John Regan, Parcxmart’s CEO. “With our turnkey platform the city makes no investment up front and we handle marketing, advertising, card issuing and system deployment,” says Regan. Additionally, Parcxmart supplies support, maintenance, and settlement.

The system also reduces a nuisance expense for cities—coin collection. Regan says there’s roughly $3 billion in quarters collected annually from U.S. parking meters and cities are looking for solutions.

For merchants, Regan says Parcxmart’s solutions are equally compelling. The benefits include a consumer rewards program designed to encourage usage, loyalty, and loading. The rewards program is designed to help merchants build income generation, increased traffic and customer retention. Parcxmart’s promotional materials are on display at merchant members and throughout downtown New Haven. The company also advertises in local newspapers and plans an e-mail program offering consumers online coupons from participating merchants.
Such benefits for merchants are the key to a successful program, according to Larry Berman, an industry consultant and 34-year veteran of the New York City Parking Authority (commissioner from 1993-97). New York City experimented with a smart card-based program in 1995, and the results were disappointing. “We tried it and about five other cities, including Miami, also tried and failed,” Berman recalls. “They were successful in the first months, but the programs wither because cities don’t have the personal, or the knowledge and drive to run them. And worst of all, they weren’t able to include the merchants.”
meter.jpgTypically, merchants see meters as detrimental to their business because they encourage customers to shop at malls, where parking is free. It’s a fallacy, says Berman, but one that needs to be addressed by starting with incentives to both merchants and their customers, and finishing with benefits to the city.

In New Haven, the incentives are very popular at Moka A Chocolate Café, says owner Duncan Goodall. “For the young 20 to 30-something professional types this is right up their alley,” explains Goodall. “We have free Wi Fi Internet access and the idea of a smart card is easy for them to understand.” Goodall counts about 80 unique Parcxmart users that have made purchases since the launch, and he believes that the smart cards are more conducive than credit cards for small-amount transactions.

“Most people seem to have a psychological barrier to using a credit card for anything below $10, and this card effectively fills that gap,” says Goodall. Parcxmart doesn’t charge transaction fees for consumers, but reloading by credit or debit costs $2. If cash is used the cost is waived.

According to Regan, Parcxmart’s merchant transaction fee is15-25 cents flat per transaction, based upon volume and other factors. Goodall says the fees are less than he pays on standard credit card transactions, and with the low costs and ease of use, he expects continued growth, especially when the new parking meters arrive. In fact, Goodall says the system will allow him to create a self-service “speed line” kiosk exclusively for Parcxmart customers.
Merchants such as Goodall are the backbone of Parcxmart’s distribution plan, and Regan says the company estimates that it can issue 50,000 cards in four additional (as yet unnamed) cities by the end of 2005. The estimates are based on surveys of merchant and population demographics in the cities. Parcxmart will get distribution help from Heartland Payment Systems, a seller of payment card acceptance services. Heartland has a national sales force of more than 800.

Ultimately, the interoperability of the system would allow consumers to use the cards for parking and for purchases within participating stores in all the cities where parking meters have been updated to use Parcxmart. The company plans to expand further into other cash driven markets in cities where small dollar transactions dominate payments. Beyond the U.S., Regan has set his sights on Europe, aiming for a 2006 launch, first in Ireland and then the United Kingdom.

About Ed Ritchie

Ed Ritchie is a Los Angeles-based freelance writer specializing in business technology and the energy industry.
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