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Perspectives

The evolving tolling landscape

Improving toll revenue collection in electronic tolling

The techniques used to levy tolls on roads, bridges, and tunnels have changed dramatically in the last 30 years. With new technologies that permit traffic to flow freely as toll authorities collect payments digitally, current roadways should be at peak efficiency. Yet current estimates indicate that US toll authorities are unable to collect at least $2.24 billion annually due to various breakdowns in the collection process.

The electronic revolution in tolling

For centuries, governments have used toll revenue to fund both new roadway construction and the maintenance of existing infrastructure. Tolling entered the computer age in 1989 with the introduction of electronic toll collection (ETC) on the Dallas North Tollway, an advancement that increased operational efficiency and largely eliminated the need for cash transactions.

In the years since, ETC has become the dominant method of toll collection in the United States.

In the 1990s, the introduction of transponder-based tolling paved the way for gateless, free-flow lanes that allow ETC transactions to be captured at highway speeds. In 1993, the Oklahoma Turnpike and Georgia’s State Road and Tollway Authority both introduced the nation’s first purpose-built free-flow tolling systems, commonly called open-road tolling (ORT).

ORT allows the customer to pay automatically via a transponder without having to stop. This eliminates the need for toll booths altogether, allowing vehicles to pass under toll plazas at high speeds while their payment and vehicle information is captured and improving safety since vehicles don’t need to slow down. While ORT is highly efficient, safer, and widely embraced by the public, it also creates opportunities for revenue loss: Of $20.24 billion in revenue owed to toll authorities each year, about $2.24 billion goes uncollected due to ineffective account conversion processes and paper-based invoicing.

Today, toll authorities collect payments primarily through three different methods: transponders, “toll by plate,” and third-party vendor systems (often used through mobile apps).

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Transponders

Most tolls collected on US roads today are captured through a vehicle-mounted transponder. It’s by far the most popular way to pay tolls. Since transponders are linked to driver accounts and are compatible with the technical infrastructure at toll plazas, they’re highly effective at collecting tolls.

Unfortunately, not all drivers have adopted transponders. At top-performing tolling authorities, an average of 82% of drivers use the local transponder system; the industry considers 73% to 85% a high adoption rate. In some of the most mature US tolling markets, transponder adoption has stalled at around 85% even after roughly 30 years of use and promotion. In addition, anecdotal evidence suggests that certain groups, such as unbanked and underbanked persons, are challenged by the prepaid deposits and fees required to open a transponder account, creating a further barrier to universal adoption.

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Toll-by-plate systems

Originally designed to identify and bill evaders of transponder-based systems, the toll-by-plate process has become the industry’s second most widely used revenue collection tool. This process uses a camera-based license plate reader to capture an image of each vehicle’s license plate as it passes under a toll gantry. The system converts the image to text via optical character recognition and cross-references the plate against a database of known toll accounts, which ensures that drivers with transponders aren’t charged twice—and that, if a transponder fails to activate under the toll gantry, the driver still is charged. If a plate number isn’t associated with a known toll account, the system tries to match the number to an address acquired via state databases so that a paper invoice can be mailed to the driver.

The toll-by-plate process, however, is subject to multiple failure points that can lead directly to uncollected revenue. Research shows that almost 40% of revenue that passes through the toll-by-plate process remains uncollected by tolling authorities.

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Third-party payment vendors

To make toll payment easier for drivers, many third-party payment options have entered the market. On some toll roads, mobile apps allow drivers to skip the transponder or toll-by-plate process entirely and pay through the app instead. In addition, some auto manufacturers have begun testing toll payment via connected vehicle technology or other onboard devices. Compared to transponders, the use of third-party toll payment solutions is significantly lower, but the use of these applications is expected to increase as the adoption of connected devices and vehicles increases.

    Better electronic tolling

    It’s easier to attract customers by making payment as seamless and accurate as possible. More options for paying tolls can reduce reliance on toll by plate and its related paper bills.

    Behavioral economics says consumers are more likely to make payments when doing so is easy. With time and appropriate investment in IT infrastructure, a free market of user-friendly, third-party payment options will emerge, all of them able to handle transactions for any toll facility. As these alternative payment options enter the market and begin to scale, a “middleware” layer will be required to connect data and payments arriving from third parties with tolling authority systems. Features such as data processing, standard application programming interfaces, and near-real-time ledgers will streamline back-end processes and allow toll authorities to integrate with third parties in a seamless, cost-efficient manner.

    With streamlined access to new payment options and better customer data, tolling authorities will spend less time and money chasing down customers and should be able to reduce reliance on the toll-by-plate process.

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    The evolving tolling landscape

    With new technologies that permit traffic to flow freely as toll authorities collect payments digitally, current roadways should be at peak efficiency. Yet various breakdowns in the process prevent over $2 billion from being collected annually.

    Get in touch

    Kevin Kelly
    Principal
    Deloitte Consulting LLP
    kevkelly@deloitte.com
     

    Christopher Tomlinson
    Managing Director
    Deloitte Consulting LLP
    christomlinson@deloitte.com
     

    Jack Fitzsimmons
    VP, Product Strategy
    Deloitte Consulting LLP
    jfitzsimmons@deloitte.com
     

     
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