The case for Open Payment in parking
Mobile payment has proved to be a successful smart parking program in cities all around the world. It creates a convenient option for drivers to pay the meter while reducing operational costs for Cities and increasing parking revenue at the same time. High mobile payment penetration means less cash used at pay machines. This allows cities to require less labor for cash collection and fewer pay machines per block. Additionally, as drivers can extend their meters remotely, cities observe higher compliance, reduce parking tickets, and drive higher revenue.
Cities in Europe and in the US have adopted very different mobile payment strategies which have yielded various results. There are different models, but we can classify them based on 2 criteria:
1- Convenience fee: Is the mobile payment provider charging its service fee to drivers or is the city covering it?
2- Open/Closed Payment: are different providers authorized to offer the service or is it a local monopoly?
The limits of the single-vendor model
The model adopted by most cities in the US and the UK at first was to have a single mobile payment provider and make the drivers pay for the convenience fee, usually around $0.35 per transaction. In most cases, those cities did not achieve high mobile penetration rates. Service providers had a local monopoly and focused their resources on closing more cities versus competing on innovation. Drivers got frustrated because they couldn’t use the app of their choice or had to download multiple apps in nearby cities. Ex: San Francisco has PayByPhone while Oakland has Parkmobile.
As a second step, some cities decided to cover the convenience fee and saw a significant increase in their mobile payment penetration.
Seattle went from 18% to 33% mobile penetration over 2 years but had to cover the convenience fee.[1]
European vibes: the Open Payment model
In most European cities, it’s a very different ecosystem. Mobile penetration is above 50% even without covering the convenience fees. Yes, European and North American markets are different for a myriad of reasons, but what is the main reason for the utilization discrepancy? Open Payment.
Cities started by adopting a technology called the “Parking Right Database”[2], a database where all the service providers connect to pull the rates and push the transactions processed. This enabled the creation of a multi-vendor market in which several apps compete to provide innovative parking services like “pay for how long you stay” type of features. The results are more competition, no reliance on a single vendor, more innovation, and an increase in mobile payment penetration at no cost for cities.
Copenhagen went from 10% to over 60% mobile penetration in 2 years without covering any convenience fee.[3]
The road to seamless parking
At SpotAngels, we strongly encourage cities to adopt an Open Payment model and are offering data and tools to help them implement it. We envision a world where drivers have a seamless parking experience — from finding a spot to complying with the rules, and cities get revenue from parking fees, not fines.
If you are interested to learn more, please email us at founders@spotangels.com!
References
[1] Seattle Parking reports https://www.seattle.gov/transportation/sdot-document-library/reports-and-studies
[2] Example of a “parking rights database”: the National Parking Register in the Netherlands https://nationaalparkeerregister.nl/fileadmin/files/Algemeen/National_Parking_Register_in_the_Netherlands.pdf
[3] Copenhagen meter payment success story https://www.parkman.dk/stories/copenhagen-online-parking-success
