New Technology Brings Cards to the Streets

  When Boston decided to replace 163 single-spaced electronic parking meters with 23 solar-powered ones that accept credit cards on a four-block stretch of Newbury Street in the city's Tony Back Bay neighborhood, transportation officials there anticipated greater driver convenience.
  For the most part, the Boston pilot initially proved successful. Though some drivers grumbled about the kiosks' inability to make change for bills and about limits the city placed on credit and debit card use, business owners and drivers generally praised the new devices. Moreover, the kiosks unexpectedly increased revenue an estimated 34%, says transaction department spokesperson Jim Mansfield.
  But on Nov. 21, about a month into the pilot, Boston put a halt to credit and debit card acceptance at the kiosks. The city, which required card users to buy a full two hours worth of parking time for $2, was in violation of Visa USA and MasterCard Worldwide rules that ban ticket-size minimums for card acceptance.
  With credit and debit cards representing 15% of the kiosk transactions in Boston, Mansfield says the city was concerned that not accepting credit and debit cards could "drastically reduce use of the meters." The city resolved the matter nine days later, when it announced plans to reprogram the machines to drop the minimum charge by mid-December.
  Boston's bump in the road exemplifies a temperamental budding relationship between credit card companies and local municipalities trying to bring street parking into the age of electronic payments. As is the case in Boston, the hurdle the cities face is the interchange cost associated with accepting payment cards.
  Because interchange is a percentage of the sale amount plus a few cents (Visa's small-ticket rate is 1.65% of the sale plus 4 cents), it represents a proportionally higher cost the lower the sale. A $1 fare, for example, can result in 5.7 cents in interchange, or 5.7% of the sale, while the interchange expense for a $2 sale is 7.3 cents, or 3.7% of the sale. Merchants ultimately pay card issuers interchange as part of the discount rate imposed by their acquiring bank.
  To overcome the interchange dilemma, some cities, such as Las Vegas, Detroit and Oklahoma City, have turned to companies such as Peppercoin that aggregate small payments to minimize processing costs, says L. Dennis Burns, vice-president of studies and operations at Carl Walker Inc., a Kalamazoo, Mich.-based consultancy. Burns also is a member of the International Downtown Association's board of directors.
  Peppercoin has a nonexclusive relationship with Duncan Parking Technologies, which provides parking kiosks in Milwaukee, Dallas and Berkeley, Calif.
  Typically, if someone parks at a kiosk in the city or municipality three times per week and pays $3 each day, the city has to pay 45 cents per week in transaction costs. With Peppercoin's "intelligent aggregation," which bundles several transactions made by the same motorist during a predetermined time period into a single transaction, the city would only pay 15 cents.
  While no statistics are yet available regarding how much aggregation can save local municipalities, Victoria Hodgkins, Peppercoin director of business development and marketing, suggests the savings could surpass the 20% savings that Peppercoin's coffee merchants are currently finding.
  And while Boston has yet to put an aggregation program into place, Thomas Tinlin, Boston's transportation commissioner, says that after a few months of collecting credit and debit cards, the city will analyze whether to put such a program in place. "The city has an obligation to be fiscally responsible, so we'll analyze the data [and see] what makes sense," he says.
  The opportunities aggregation provides could pave the way for more cities to find a way to maximize the benefits of accepting credit and debit cards for street parking, since multispace kiosks are only going to grow in prominence, Burns says.
  "The technology offers advantages to cities that they didn't have before and to the citizenry that they didn't have before," says Haugsland. "It's not a flash in the pan, but something that will continue to grow and take a larger portion of overall meter sales in the U.S."
  Indeed, because of plastic's growing popularity as a payment tool, many observers, including Burns, contend cities and credit card companies need to find ways to strengthen their relationships to make cards a payment option for street parking. "It used to be rare to pay with credit cards, but now it's the expectation," Burns says, suggesting that enabling street parkers to use payment cards improves customer service and could spur more visits to downtown businesses. "It's the preferred payment methodology."
  TECHNOLOGY CHOICE
  Two predominant street-parking kiosk categories exist: pay and display and pay by space.
  Both types of kiosks already have replaced more than 1 million of the nation's 4.5 million U.S. parking meters, according to Kim Jackson, executive director of the International Parking Institute.
  Pay-and-display parking kiosks require drivers to walk to a single machine displayed on a block, pay for a designated time period and place the receipt that is dispensed in their windshield. Pay-by-space kiosks require drivers to note their space number, select the designated spot at the kiosk and then pay for an allotted time.
  While the cost of the kiosks can be as high as 74 times the cost of a single-space coin meter, Tinlin suggests that the lower repair and service costs associated with the new meters make up for additional costs. For instance, Boston's new kiosks have yet to fail, while the city's single-space meters such as those the kiosks replaced, fail 22% to 25% of the time, says Tinlin.
  Moreover, Tinlin points to Chicago, where he says less than 1% of drivers pay 25 cents with a payment card. This, along with the elimination of "piggybacking" on others' time, has helped Chicago increase its gross revenue 30%.
  But, according to Chicago officials, the benefits extend far beyond revenue. "[Pay-and-display] kiosks give drivers the convenience to pay with a credit card, and in areas with high volume or with tourists, you have to provide customer [convenience], which the meters provide," says Chicago Department of Revenue spokesman Ed Walsh.
  Proponents of pay-and-display kiosks suggest they are more aesthetically pleasing because they require minimal signage. Those who support pay-by-space kiosks believe they are less labor-intensive and easier to understand.
  Ultimately, the technology a city chooses depends on its individual needs, according to Jackson.
  One way of determining the best fit for an area is to test a variety of methods. For instance, in November St. Louis replaced 40 single-space coin meters with four pay-by-space kiosks manufactured by Duncan Parking Technologies. The city replaced 40 other single-space meters with four pay-and-display kiosks from Parkeon Inc. Duncan is processing through Peppercoin, while United Missouri Bank is processing the Parkeon meters' transactions.
  WEATHER TEST
  The four-month pilot will run through February, by which time city officials hope to determine how the meters withstand St. Louis's typically harsh winter months. "I can have salesmen show me their meter and how well it works in my office, but I don't know how well it works on the street without looking at both technologies," says Steve Baker, director of planning and support services for St. Louis' treasurer's office.
  Baker is eager to see whether the meters will improve on-street parking in the city's South Grand neighborhood. "The goal is to make parking more available for people looking to do business in the area," he says.
  Baker also intends to see whether St. Louis drivers will use payment cards at the meters. "Multispace meters work in New York, they work in Chicago, but we don't know if they'll work here," he says. "I know a lot of people [in St. Louis who] don't like using their cards on the street. I don't understand it. If you're willing to put your card in a gas pump, what's the difference?"
  After analyzing the pilot results, Baker and the city may take more than a year to field bids and determine the best way to roll out the kiosks.
  A number of smaller cities already have seen strong increased use of the new kiosks and are looking to use them to complement efforts to revitalize their downtown areas. In December, for example, Manchester, N.H., replaced 634 parking meters with 93 Cale Parking Systems' pay-and-display parking kiosks. The transactions, which are processed by Citizens Bank, currently cost the city 22 cents per transaction.
  The project arose out of the city's efforts to spur downtown development. By erasing parking lines, the city wants to increase the number of cars able to park by 10%. Because the kiosks have increased revenues by about 30%, Brandy Stanley, the city's parking manager, believes the city will recoup its more than $700,000 investment within four years.
  "What we're trying to do is entice people to visit business downtown, and the convenience of paying with credit cards can help do that," she says. "We want to eliminate parking as a stumbling block to coming downtown."
  The drive to add convenience to the parking experience is one of the biggest draws of the kiosks, says Jackson. "People don't have change for meters," she says. Payment card acceptance "allows us to keep up with the overall customer trend."
  The new meters, Jackson says, help with parking planning by providing a fuller picture of parking usage throughout the city by gathering a variety of data points. This includes which areas are used most often, how long people are staying at a spot, how much they are paying per use and what times are busiest.
  The new data could have dramatic consequences for cities and municipalities, says Burns, noting that after aggregating the data, cities and municipalities can reevaluate parking costs to be more in line with the market rate. "If parking is priced according to the market rate, it will be priced at the lowest rate to maintain 15% availability," he says. "You don't want spaces to always be full, but you also don't want them to be empty."
  As such manufacturers as Parkeon Inc. and Duncan Parking Technologies increasingly make their meters simpler and easier to use, this will help eliminate another potential hindrance, which is setup and maintenance costs, says Burns.
  FASTER FIXES
  In fact, one of the key selling points for Duncan's pay-by-space meters is that the kiosks have few moving parts and require less manpower to enforce than single-space or pay-and-display meters. Police officers only have to look at the kiosk to see which spots have expired instead of walking up to each vehicle.
  "The officer doesn't even have to get out of the car," says Jim Haugsland, Duncan senior vice president of sales and marketing.
  When a machine malfunctions, it reports the problem to a central office, which can then replace the broken part. Today, someone must report a meter broken before it is fixed.
  "One of the early barriers was it was hard to find local service for the [kiosks]," says Burns. "But as they move to plug-and-play, they're easier to deal with and require minimal training for the price of the system. All you have to do is swap components, which is simple."
  As more consumers carry less cash, cities can look at the growing pains and costs associated with the new kiosks. And if you ask Jackson, many will find the costs worth the benefits.
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