Far from being unwelcome disruptors, third-party tolling service providers can bring multiple benefits to agencies and customers alike, which is a why a new framework of recommendations is being proposed in the US to overhaul outdated practices, as Lev Pinelis and Marissa Burkett of Toll Insight, explain
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The US tolling industry continues experiencing a potential shifting landscape in account management. More public agencies are showing a willingness to allow for customer management by third-party providers (3PPs) such as fleet managers and mobile app vendors. This calendar year, 3PPs have combined efforts to engage US toll agency leadership to discuss best approaches for further collaboration.
Beginning in February 2023, Toll Insight, a knowledge-sharing and networking hub for the tolling industry, helped convene a 3PP Working Group to address the changing environment. The culmination of the 3PP Working Group’s initial meetings included a deliverable that documented collective challenges and opportunities. This was presented to industry leaders and was found to align well with outcomes from similar endeavors, such as those being led by US toll agencies.
“Providers today see a viable path to the future where customers have more choices in their tolling account management; yet, they are facing a variety of challenges from the obsolete frameworks within the US”
Andrew Peppard, VP national practice lead, Kapsch
The group identified several benefits from the implementation of 3PPs both from agency perspective and for customers. See the box-outs on this page/overleaf.
“Providers today see a viable path to the future where customers have more choices in their tolling account management; yet, they are facing a variety of challenges from the obsolete frameworks within the US,” says Andrew Peppard from Kapsch, which recently ceased operations of its mobile toll payment app Uproad. “The 3PP group has convened to dissect those issues and is eager to contribute to shaping an optimal way forward for the US tolling industry.”
To achieve an environment with improvements for both tolling agencies and customers, the 3PP Working Group outlined the following recommendations:
1) Create one-stop shops
The first recommendation of the 3PP Working Group is to establish value-driven, centralized one-stop-shop hub options. Currently, 3PPs exert a significant effort on managing multiple relationships and interfaces across numerous toll regions and agencies. Each relationship requires technical, financial, and customer management interfacing, along with specific business rule tracking. The cost of joining and operating through a hub should be sufficiently counterbalanced by 3PP benefits and cost savings when compared with today’s state of practice. The recommendation acknowledges this might occur through one centralized hub or multiple hubs.
For example, Virginia DOT/E-ZPass serves as a central clearinghouse for all toll facilities within the state with an established third-party vendor participation program. A standardized interface and commercial agreement are used to simplify the process. Currently, multiple mobile app vendors are live and participating, using this centralized service that’s coordinated and managed by VDOT.
2) Equitable compensation
The second recommendation is that evaluation should be carried out to ensure home agencies and 3PPs are compensated equitably for account management services provided.
3PPs often are not compensated for removing program cost burdens from toll agencies. Costs include customer account management, payment processing fees and sometimes, transponder purchase and distribution. Conversely, away toll agencies compensate home agencies for certain costs, e.g., credit card processing fees, while assuming counterpart parity in other account management functions across the mutual/overall customer base. Instead, 3PPs may need to pay extra fees to participate in certain toll regions/networks, while not having a chance for parity-based benefits in return.
“We can learn from the European environment while we are building our own model”
Frederic Charlier, CEO, ClearRoad
Agencies need to evaluate whether 3PPs are fairly compensated for the account management services they provide and whether that remuneration considers the burden of guaranteeing the toll customer.
As a potential model, in the European Union, the European Electronic Toll Service (EETS) allows toll chargers (asset owners) to delegate account management to toll service providers. Providers are remunerated (typically between 1-3% of the toll amount) by the toll charger in exchange for providing account management services. In addition, they also charge fees to their customers for the provision of toll payments. The model is currently active for HGVs and is expected to be expanded to the passenger car segment in the future. “We can learn from the European environment while we are building our own model,” says Frederic Charlier, CEO of ClearRoad. “With EETS, service providers can offer an exceptional customer experience, international interoperability, and value-added services. Meanwhile, toll chargers benefit from account management capabilities for transnational customers and can focus on their core mission.” ClearRoad has launched the Ecotoll mobile app, while also developing new clearinghouse exchange options for road user charging and tolling.
3) Prioritize inclusivity
The third recommendation of the Working Group is to include 3PPs into the ongoing governance structure and operation of the toll industry and interoperability network.
The toll industry is generally governed by public toll agencies, perhaps too often without regular coordination with existing and new 3PPs. This limits 3PP business model capabilities and negatively impacts certain customers’ experience, industry efficiency and private sector innovation. There is not a clear view of which third-party vendors / 3PPs are legitimately operating within the tolling ecosystem. When there are material changes within key agency operations (e.g., back-office issues/transitions), 3PPs discover them through operational data and are not informed in advance. Again, looking to Europe for a potential example, the Association of Electronic Toll and Interoperable Service (AETIS) was formed and operates to represent 3PPs and contributes to the development of the EU EETS framework.
4) Limit toll guarantees
There are sometimes significant delays from time of travel until away toll agencies transmit the toll transactions through the network to 3PPs for payment. The group suggests implementing toll transaction transmission timelines, as well as limiting credit requirements / use of surety bonds. Furthermore, innovative 3PPs are not able to offer non-guaranteed toll payment options within the current national interoperability framework, even if they have a relationship with customers who potentially have outstanding toll bills.
5) Allow local discounts
Certain US toll regions offer toll discounts only to their own customer base, requiring sign-up for their specific account offerings. 3PPs integrating through a regional hub/liaison agency may not have access to discounts, creating a disparity for third-party customers. These customers may still be the same type of local commuters or others who should qualify for the established discounts.
This recommendation aims to target like-for-like equity for local customer discounts, regardless of who manages their account.
There are several examples of discount programs across the United States including in Virginia, New York, New Jersey, Maryland, and California. For example, the Toll Roads of Orange County offer a frequent driver discount.
6) Match rates
It is recommended guaranteed 3PP license plate-based toll customers be charged the same rate as agencies in like-for-like circumstances.
Many toll agencies have already or are starting to adopt a higher pay-by-plate toll rate, largely to counterbalance against associated leakage within an all-electronic tolling (AET) operating environment. 3PP plate-based customers are currently required to be guaranteed; thus, the toll agencies do not carry the leakage/collection risk for these tolls. That said, many agencies already equitably charge 3PP the appropriate rate (either the transponder rate or in some case, with a surcharge). The recommendation acknowledges this fact and encourages such practices to continue and expand. For example, the Virginia DOT allows mobile app vendor customers to pay the transponder rate plus a limited surcharge. The surcharge helps recover the costs of processing video transactions. Since the vendors ‘know’ the customer and guarantee the tolls, VDOT / toll operators do not need to complete DMV lookups, mail invoices, process payments, manage collections and face leakage risk.
7) Open account management
The seventh recommendation of the 3PP Working Group is a tolling account management ecosystem to create customer choice, convenience, and service differentiation.
Most customers maintain single-purpose toll accounts with local toll agencies. There can be political concern about handing over customers to a third party as well as concern from toll agencies about risks to established brands. Additionally, agencies might be afraid of the organizational impact of outsourcing a major part of their operations. However, convenience and reliable/certified options for the customers should ultimately boost, not hinder, the toll industry traffic and revenue, innovation and overall potential for growth.
Referring again to Europe, EETS has now attracted 16 registered providers. Customers benefit from full choice among providers specializing in account management, while providing varied benefits, for example, different combinations of interoperability and additional value-added services.
8) Promote all payment options
Customers are generally not made aware of third-party account options, for example, on toll agencies’ websites, roadside signage, and correspondence. Customers may not know that they have several options for the payment of their tolls.
“Legacy US-based 3PPs have already become a trusted partner for commercial fleet customers as well as agencies”
Joe Clavelle, VP business development, Bestpass
Third-party account management options may be considered by some customers as potentially illegitimate. In Norway, third-party providers are featured on the government website, allowing customers to choose the option that best fits their needs. “Legacy US based 3PPs have already become a trusted partner for commercial fleet customers as well as agencies,” says Joe Clavelle of Bestpass, which provides specialty toll account services for national and regional fleets in the US. “We have been able to reduce leakage and eliminate paper violation invoices through the national, interoperability network that we’ve established.”
9) Standardize data sharing
The final recommendation of the 3PP Working Group is that dispute management practices and information sharing across agencies should be standardized. Communication between agencies and 3PPs should also be streamlined.
Dispute management across agencies is inconsistent and can be difficult to access. Non-response from agencies during disputes is an issue of significant concern to the 3PPs. If the relevant toll agency does not reply to requests for information/fee adjustment, there is evidence that the 3PP must still pay the original toll. The further away 3PPs are from the agency that is processing the toll, the more difficult it is for them to troubleshoot any customer/agency issues efficiently.
For example, as regional toll hubs (e.g., Central US toll hub) are set up, inter-agency dispute management processes are established. This can be used as a broader model for nationwide toll disputes management and customer service. Perhaps, lessons learned can also be drawn from how this works within each region for further optimization.
Benefits of 3PP for customers
- 3PP facilitates ease of access and enhanced customer experience as well as an open ecosystem that allows customers to make the best choices for their needs
- Account management handled by customer experience experts
- Expanded interoperability and ease of account management lead to increased efficiency for fleet owners
- Moreover, 3PPs can expand the availability of complementary service provision options to customers
Benefits of 3PP for tolling agencies
- The employment of third parties allows toll agencies to focus on their core mission instead of having deep involvement in collections
- Leakage can be reduced due to ‘fill-the-gap’ toll revenue streams from 3PP customers
- Aligns with the trend for higher adoption of electronic tolling and overall acceptance of tolling nationwide
- Increased competition among players creates general industry improvement and efficiency
Delivering results
In the Summer of 2023, Toll Insight presented the recommendations in this feature to the US National Tolling Interoperability (NIOP) group, a group comprising of key toll industry representatives. NIOP leadership concurred the deliverable from the 3PP Working Group helped strengthen the voice of the 3PPs and encouraged the industry to allow them a seat at the table when working towards national interoperability. 3PP integration will now be a focus area for the NIOP, with industry and 3PP engagement a priority. The goal of the continuation of the 3PP Working Group is to build off this momentum.
This feature first appeared in the December 2023 edition of TTi magazine
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