Greater Greater Washington

Parking


Parkmobile raises fees, blames Congress

Parkmobile, the vendor that provides the District's pay by phone system, just sent out an email to all of its customers, saying that it is raising its fee for each parking transaction by 10¢. However, it is also introducing a system that lets people store up value and then pay a lower fee.


Photo by Wayan Vota on Flickr.
Beginning October 29th, transaction fees in DC will increase from $0.32 to $0.45 due to increased costs triggered by recent federal legislative reform enacted by the Dodd-Frank Wall Street Reform and Consumer Protection Act's Durbin Amendment.

To help offset this increase Parkmobile has developed the Parkmobile Wallet which will provide a more cost-effective parking experience in DCWallet transactions will carry a $.30 transaction fee.

The wallet essentially works more like SmarTrip or E-ZPass. Instead of paying by credit card for each transaction, you store some value in a Parkmobile account and then spend that down.

DDOT has an exclusive contract with Parkmobile. The contract does give DDOT authority to approve or reject rate increases, and DDOT spokesperson John Lisle said that the company had been talking with DDOT. DDOT officials were persuaded that the reasons for raising the rates were real, and agreed to a rate increase.

Lisle also pointed out that 45¢ is not out of line with other Parkmobile installations; fees in Rehoboth are 45¢ today, for instance.

The way the email blames regulatory reform seems somewhat suspicious, though. According to Parkmobile spokesperson Laurens Eckelboom, the Durbin Amendment last year capped the "interchange fees" that card issuers could charge. Banks responded by eliminating discounts they had previously given to merchants who process a lot of very small transactions.

As a result, Parkmobile's transaction fees tripled. Eckelboom was not willing to say what the fees they pay to banks are, but he said that they were losing money with the current 32¢ fees.

Whether or not this is actually a consequence of the Durbin amendment or just bank behavior is a subject of dispute. Eamon Murphy wrote for AOL last December:

But higher costs due to swipe fees are not direct consequences of the law itself; rather, they result from the card companies' response to the law. This is not the financial industry's first attempt to avoid any loss to their own profit margins by raising costs for others: Big banks previously floated plans to charge consumers a monthly fee for debit cards, before a public backlash caused them to back down.
It's clear this change was out of Parkmobile's control, but less clear they needed to specifically blame Durbin and not their banks, or just note that this was a result of rising credit and debit card fees without blaming anyone.

DDOT did not choose to share any information with the public as these discussions were going on. Lisle noted that DDOT negotiates other contracts, like streetlights, without public input. However, those contracts involve spending DDOT's budget, whereas this one authorizes a third party with a government-granted monopoly to charge residents more.

Pepco has to go through more of a public process to raise its rates. Should a more participatory process apply here as well, or is it best to leave it to those whose job is to manage the program?

One long-term solution is to set up a mechanism where multiple companies can compete. Establish an API where any authorized provider can register parking actions with a central DDOT database. Each provider collects payments on its own, however it wants, and then gives DDOT all of the base parking fees at the end of each week or month.

Such a solution would require some software development and take effort, but that would let companies choose their own fees and compete based on them, service, app quality, and more. The same API and maybe the same backend technology could work across many cities, letting cities share the cost of building the system.

David Alpert is the Founder and Editor-in-Chief of Greater Greater Washington and Greater Greater Education. He worked as a Product Manager for Google for six years and has lived in the Boston, San Francisco, and New York metro areas in addition to Washington, DC. He loves the area which is, in many ways, greater than those others, and wants to see it become even greater. 

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Not to weigh in on the rates' justification themselves, I'd hesitate to draw direct comparisons with utilities given that utilities tend to be widely appreciated as a public need. Whereas pay-by-mobile parking is perhaps not quite as critical.

by Bossi on Oct 25, 2012 4:15 pm • linkreport

Echoing Bossi's point, there is also the option to pay with coins and incur no fees. Parkmobile is providing a convenient option at an expense that may or may not be worthwhile, and will continue to compete with the traditional payment method of coins. Utilities, by nature of their government granted monopoly, do not have such competition.

by ah on Oct 25, 2012 4:25 pm • linkreport

Now, as for the alternative 30c fee, I'm missing why that's needed on a per-transaction basis. With EZ Pass, or Smart Trip, or any other stored value mechanism, I pay for the cost of the service/toll/fare, not an additional per transaction fee as well.

What's the justification for that? If they get $25 from me, on a recurring basis, why is it reasonable to charge me 30c each time I access that?

by ah on Oct 25, 2012 4:26 pm • linkreport

It baffles me that DDOT was stupid enough to give Parkmobile a monopoly bind themselves into an exclusive contract? Why not run pay-by-phone through an open source system allowing free market competition between different companies with different fee structures?

You know, the way they run things in communist Europe.

by Jasper on Oct 25, 2012 4:31 pm • linkreport

Jasper, in "communist" europe, who paid for the hardware/servicing to set up the park by phone system?

by ah on Oct 25, 2012 4:39 pm • linkreport

I'm with ah (4:26pm) - I don't get the justification for a $0.30 transaction fee on Wallet transactions - it's not like they're paying any fees for the credit card transaction beyond the one fee to load the Wallet.

by jaybeas on Oct 25, 2012 4:42 pm • linkreport

These fees aside, the conspirator inside me things DC Parking enforcement has access to or is notified by Parkmobile when the meter is up.

Yes, DC has always been draconian about meters and is about the most skilled service DC government provides. If you are more than 10 minutes late back to your meter, you can pretty much assume you have a ticket.

However, I downloaded the app a month ago and have used the service twice. BOTH times I got back to my car less than 4 minutes after the time was up (once, literally 2 minutes late, I watched the ticket lady walk away) and BOTH times I got tickets.

Yes, you have the option of putting more money on automatically, but both times I was walking back to the car and didn’t think 2 minutes would get me.

My brother as also experienced the same thing. Parking enforcements uncanny ability to get to the meter within 2-3 minutes of it being up.

I haven’t used it since, opting to pay cash instead and have been my usual 7-10 minutes late back to the meter (parking on the same street mind you) and haven’t gotten a ticket since.

by Setmeup on Oct 25, 2012 5:20 pm • linkreport

The Parkmobile fees are outrageous - whether its 45 cents a transaction, 32 cents a transaction or 30 cents each time you draw out of an account. It is difficult to understand why DOT would find these fees reasonable; Parkmobile is getting more money than the District is for anyone who parks for only a short period of time. Quite frankly, I'd rather see DC raise the actual fees to park and have the money go back to the District coffers, rather than just feeding some private company in Atlanta. Where are our Council members on this - do any of them care?

by abh on Oct 25, 2012 5:43 pm • linkreport

@ ah:Jasper, in "communist" europe, who paid for the hardware/servicing to set up the park by phone system?

I am not sure what you mean. Cities put up numbers with the parking spots. Those numbers are made available to companies who wish to offer their services. Cities have some process to determine if companies are legit, and then let them do their thing. For instance, in Rotterdam, you can pay via:
Park-line
Yellowbrick
SMSParking
Parkmobile
http://www.rotterdam.nl/product:06_parkeren_
In Antwerp, you can pay via:
Sms-parkeren met Mobile-For
Gsm-parkeren met Parkline
http://www.parkereninantwerpen.be/parkeren/bezoekers/gsm-parkeren/gsm-parkeren
[I apologize for the Dutch websites, but you get the gist]

Different companies have different payment schemes. With some you pay a surcharge per time you park, with others you pay a monthly or annual fee on top your parking fee.

In any case, consumers have choice and payment providers have to compete and can not yank customers around in a monopoly.

by Jasper on Oct 25, 2012 8:48 pm • linkreport

When i got the email about the fee increases I really thought "what a douchy thing to say." Rules are the cost of business. Deal with it. I don't tell my kid I can't by a new toy because of changes to the mortgage interest deduction and burdensome taxes.

What sucks is the whole wallet idea means people will credit money to Parkmobile which sits in its bank account and earns interest, and when there is a wallet transaction it doesn't result in transaction fees since its an accounting move rather than a credit card transaction. Parkmobile could probably have no fees on its wallet transactions.

Sorry for the rant, just tired of hearing companies complain.

by jason on Oct 25, 2012 9:15 pm • linkreport

I thought the e-mail was sketchy because it didn't explain the mechanism by which their costs were increasing.

It was undiplomatic and borderline unprofessional in how it presented the issue- basically, "we're increasing the rate, but blame Congress and not us. Bye"

by Wilsonia on Oct 25, 2012 10:25 pm • linkreport

@David Alpert: first of all, thanks for the story.

This entire arrangement is wrong. No, Parkmobile is not providing a service to people that park; it is providing a billing service to DC. Instead of sending a collector around with a heavy box on wheels full of change, vulnerable to robbery and employee theft, parkmobile sends in a check with an auditable account trail. It is amazing that they get to stick the bill to the drivers.

I agree with Jasper, there should be alternatives, just like there are alternate credit cards. And this contract should not be renewed.

by goldfish on Oct 26, 2012 8:27 am • linkreport

Thanks for this piece and for the comments and good thinking that went into them. Of course my first reaction was for the DC Council committee with oversight of DDOT to have a public roundtable immediately. The subject? Just what you all have raised - why sole source the collection mechanism, etc. As good as GGW is, let's get the elected officials doing their job of oversight.

by Susie Cambria on Oct 26, 2012 8:39 am • linkreport

As others have pointed out, Parkmobile's fees are already ridiculous, and raising them isn't something required, or justified, by Dodd-Frank's interchange fee rules. I say "ridicule" not because they're high (I don't like shelling out money, but I like the recently raised meter fees because I can find a spot!), but because a plan to separate out the transaction cost of (and thus discourage) a payment method that is hugely advantageous to DDOT is worthy of ridicule. Having to collect coins from individual meters, and repair finicky mechanical coin slots, is an expensive proposition for DC. Funny that DDOT doesn't tack on a fee to cover those costs.

by Paula Product on Oct 26, 2012 8:55 am • linkreport

Just as a comparison, here is the pricing scheme of Parkmobile in the Netherlands:
http://www.parkmobile.nl/tarieven

You have a choice of two.
1: Pay parking + €0,25
2: Pay a membership fee of €1,75 per month + parking

They even spell out that if you use their services more than 7 times a month, you should sign up.
http://www.parkmobile.nl/tarieven

by Jasper on Oct 26, 2012 9:21 am • linkreport

Oh, look, they speak English!
http://www.parkmobile.nl/nle/costs//

by Jasper on Oct 26, 2012 9:43 am • linkreport

Rules are the cost of business. Deal with it.

They are dealing with it - by increasing the prices customers pay them.

@Jasper
I am not sure what you mean. Cities put up numbers with the parking spots. Those numbers are made available to companies who wish to offer their services.

The city has to have some sort of backend system that integrates all these companies' efforts so the city knows what's going on.

by MLD on Oct 26, 2012 9:46 am • linkreport

Does anyone know how long DDOT has contracted with Parkmobile for?

by ontarioroader on Oct 26, 2012 9:55 am • linkreport

Jasper - The point I was trying to make earlier is that there is a cost to setting up a system like ParkMobile's, particularly when it's being layered on top of individual meters instead of multispace machines. An exclusive contract provides an incentive to make it attractive to a company like ParkMobile to invest in the necessary equipment to make it happen, as well as signage, etc.

If the city undertakes that investment in the first place those costs are "hidden" in the form of taxes or other revenue generated indirectly. True, as Goldfish notes these costs arguably *should* be borne by DC directly as part of their parking enforcement program, but the reality of our political system is that people seem much more resentful of increased taxes and spending by government than they do in Europe.

Of course, this pattern has been repeated elsewhere - for example, EZPass users typically get hit for a monthly fee even thought EZPass was advertised as a mechanism to reduce the costs of toll collection by human collectors while increasing the speed of toll collection (no stops). So, how/why should EZPass users pay more than cash payers? Same here - DDOT should reduce parking fees for those using Parkmobile, as it saves DDOT the costs noted by Goldfish. I suggest either a 25c discount off of any meter fee, or reducing rates by 25c/hour.

by ah on Oct 26, 2012 10:25 am • linkreport

@ontarioroader: Don't know specifically, BUT: Government contracts terms are for one year, with an option to renew. Typically the contract has two to four renewal options, meaning that it runs three to five years. This is because government funding is in yearly increments, and that no sitting legislature can limit the actions on subsequent legislatures -- that is, the 2012 city council cannot spend money for the 2014 city council. If the 2014 does not like what the 2012 council did, they can just pass another law rescinding the previous legislation.

Contracts that extend long than a single year without renewal are extraordinary and rare.

by goldfish on Oct 26, 2012 10:25 am • linkreport

Whether or not this is actually a consequence of the Durbin amendment or just bank behavior is a subject of dispute.

Those aren't mutually exclusive. Industry is going to respond to regulation, in this instance for a rule that was estimated to cut revenue by $7 billion.

by Fitz on Oct 26, 2012 10:46 am • linkreport

The DCIst article linked from today's links provides an interesting cost breakdown (albeit supplied by ParkMobile).

Before:
32c fee from PM
6c fee from CC processor
26c gross revenue (inferred)

After:
45c fee from PM
30c fee from CC processor
15c gross revenue (inferred)

This also means that they receive 30c in gross revenue from your "Wallet" payment, although that's reduced by whatever CC fees they paid for the initial transaction processing, which is presumably ~50c for a $25 transaction (fee is apparently typically the greater of 30c or 2% of transaction). So that means for them the Wallet transaction is likely more profitable--with a $25 refill that's a minimum of 6 parking events (assuming 2 hour max of $4 plus fees), which means they are paying at most 8.25c per parking transaction in the CC fee spread over those transactions, and thus receiving adjusted gross revenue of at least 21.75c for each parking event--more than they appear to be receiving from a single-use transaction.

No wonder they want to encourage the wallet - it's a win for them, but, as it turns out, a win for you as well.

by ah on Oct 26, 2012 11:03 am • linkreport

when i recieved the email yesterday, i replied telling them it was BS to blame it o regulation. Also I mentioned i understand offering a different payment method (to avoid credit card fees) but Starbucks has is own "wallet" (the rewards card) and they dont charge transaction fees AND they give you a free drink after a few drinks.

So as some others have said, in a monopoly PM will try to raise as much fees as possible....with competition or an opensource data/system im sure other companies will offer better payment plans or discounts like the Dutch example

Btw..i got an autoreply to my email from PM saying they opened a "case" and they will reply in 8 hours...that hasnt happened

by re on Oct 26, 2012 11:28 am • linkreport

@ ah:If the city undertakes that investment in the first place those costs are "hidden" in the form of taxes or other revenue generated indirectly. True, as Goldfish notes these costs arguably *should* be borne by DC directly as part of their parking enforcement program, but the reality of our political system is that people seem much more resentful of increased taxes and spending by government than they do in Europe.

It's penny wise and dollar foolish though. And it leads to anti-free-market de-facto monopolies.

Of course, this pattern has been repeated elsewhere - for example, EZPass users typically get hit for a monthly fee even thought EZPass was advertised as a mechanism to reduce the costs of toll collection by human collectors while increasing the speed of toll collection (no stops).

Very good comparison. Tourmobile is another example of the same problem. Cable companies.

Same here - DDOT should reduce parking fees for those using Parkmobile, as it saves DDOT the costs noted by Goldfish. I suggest either a 25c discount off of any meter fee, or reducing rates by 25c/hour.

No, the city should just behave like a good stewart of tax payer money and American values, built (or buy) a(n open source system) for the data exchange and then let different companies compete for the customer. For parking, it can't be hard. It's location data, a car tag and a start and finish time. It's so little data you could tweet it.

Currently, the government imposes monopolies. Honestly, it is one of the things I get the least about this country.

by Jasper on Oct 26, 2012 11:59 am • linkreport

Jasper - The government creates monopolies of this type in order to finance the infrastructure and have the users, rather than all taxpayers, finance the cost. What you propose is to have the city pay for the entire infrastructure and then let some number of competitors (which hopefully is at least 1, with no guarantee it is greater than 1) offer the variable service, as none of them individually would have the incentive to help fund the infrastructure.

I'm not sure we're worse off this way . . . indeed the link to Holland's system suggests per use fees quite in line with those here.

by ah on Oct 26, 2012 12:50 pm • linkreport

The government creates monopolies of this type in order to finance the infrastructure and have the users, rather than all taxpayers, finance the cost.

The cost of what? Putting a numbered sticker on parking meters and maintaining a table relating those numbers to a geographical position? The government still needs to maintain a server that links to all the hand-helds of the parking cops.

What you propose is to have the city pay for the entire infrastructure and then let some number of competitors (which hopefully is at least 1, with no guarantee it is greater than 1) offer the variable service, as none of them individually would have the incentive to help fund the infrastructure.

I guess it all depends on what you think the role of the government and parkmobile is. I see parkmobile as a payment service. Not as an infrastructure builder - that's the role of the government. I'd also argue that the cost of the mobile payment infrastructure is marginal compared to the cost of the existing parking infrastructure, including the building and maintenance of the physical parking spots and parking meters. I am not sure why you would suddenly want to outsource that. It's not like parkmobile built the parking spots.

Outsourcing all parking payments and maintenance happens in Chicago, and we can all see how happy Chicagoans are with that deal.

I'm not sure we're worse off this way . . . indeed the link to Holland's system suggests per use fees quite in line with those here.

This must be the first time that I hear an American say that a monopoly is the better option.

BTW: Parking rates are much higher in the Netherlands than in DC. In Rotterdam it's €3/h 7 days a week between 9am and 11pm in most of downtown. In downtown Amterdam it goes up to €5/h between 9-midnight.

by Jasper on Oct 26, 2012 1:42 pm • linkreport

Btw, just got a response from PM and they also posted in https://parkmobile.zendesk.com/entries/22242307.

by re on Oct 26, 2012 1:49 pm • linkreport

Jasper - I'm not saying monopolies are better. I'm recognizing that exclusive contracts have their benefits. It's not as if before Parkmobile we had vendors lining up to offer this service. As you note, it would take an effort by DC in the first place to set up some sort of infrastructure (we can disagree on the costs) for this to work, and that has a cost associated with it.

If your point is that DDOT cut a bad deal, well, what's new with DC contracting? They've got two fully loaded Navigators as Exhibits 1 and 2.

by ah on Oct 26, 2012 2:53 pm • linkreport

@ ah:It's not as if before Parkmobile we had vendors lining up to offer this service.

Well, he vendors are around. Otherwise cities in Europe would not have several companies to work with.

If your point is that DDOT cut a bad deal, well, what's new with DC contracting?

Well, the concept of an exclusive contract setting up a monopoly is a bad idea.

two fully loaded Navigators as Exhibits 1 and 2.

Cheers to that :-D

by Jasper on Oct 26, 2012 2:59 pm • linkreport

I don't work for Parkmobile, nor do I like fees. But, comments like this seem a bit naive: "What's the justification for that [charging $.30 per transaction]? If they get $25 from me, on a recurring basis, why is it reasonable to charge me 30c each time I access that?" ParkMobile is a business, after all. I assume DC gets 100% of the parking meter revenue (since the same base rate is charged for cash or Parkmobile). It can't survive simply by passing on the credit card fee and taking nothing for itself. (Reminds me of the SNL "Change Bank" skit, about the bank that did nothing but make change. "People ask us how we stay in business: Volume.") I suspect a $.40 transaction fee for $25 worth of parking (7 or 8 hours) isn't enough to stay in business.

The more equitable alternative, I suppose, would be to add a surcharge per minute, with variable rates for wallet vs. per session customers. But that doesn't seem like it's in anyone's best interest except Parkmobile's.

I have to say, as a consumer/parker I love ParkMobile. No carrying around coins, no dealing with DC's notoriously unreliable meters, and, at least for now, ParkMobile gives you the ability to extend parking sessions after time runs out (instead of running back to the car to pump a meter and get a new dashboard ticket). That in turn seems like a good deal for DC -- it makes it possible to park on a city street for 4 or 5 hours, with revenue going directly to the city, rather than to a parking garage.

And, as others have suggested, if you don't like Parkmobile's business model, you can still pay with coin. My recollection is the pay stations (which spit out receipts you put on the dash) take credit cards and don't charge transaction fees. With plenty of alternatives of available, seems like the free market can decide this.

by mvm on Oct 26, 2012 3:36 pm • linkreport

@ mvm:if you don't like Parkmobile's business model

I have no opinion on Parkmobile's business model. I hate that DDOT forces me to use Parkmobile and denies me the choice to use another mobile payment provider.

by Jasper on Oct 27, 2012 1:16 pm • linkreport

As someone that has developed parking payment applications for mobile phones, I can see why Parkmobile has to add a fee. Durban charges them $.24 per transactions + any passthrough fees from their aquiring processor.

That said, why are these contracts exclusive. This just makes it harder for drivers to access. Think about it, imagine if you had to set up a eWallet for every mobile service you signed up for. This makes no sense.

Parking entities should create an API that allows multiple payment companies to authenticate payments. This would solve the problem.

by Parking Expert on Nov 1, 2012 8:08 am • linkreport

Durban charges them $.24 per transactions + any passthrough fees from their aquiring processor.

The Durbin amendment doesn't charge anybody anything. Federal Reserve rules limited debit card transaction fees to $.24. The banks raised the fees to that limit in response to losing revenue in other areas. You make it sound as though the government put a tax on these transactions and then processors have fees on top of that - this is untrue.

by MLD on Nov 1, 2012 8:30 am • linkreport

Lamest followup ever, by the way, from ParkMobile:

Dear Valued Member,

Last week in a press release and email announcement introducing the Parkmobile Wallet, a simpler, lower cost way to pay for parking in the District of Columbia, the company made an overly simplistic statement about the underlying cause of increasing card transaction fees. In an attempt to explain why costs have increased the company left the potentially confusing impression that Federal legislation is to blame. The company apologizes for any confusion caused by this statement.

Sincerely,

Laurens Eckelboom
Executive Vice- President Marketing & Channels
Parkmobile USA, Inc.

So, what exactly is the non-simplistic explanation that you failed to offer?

by ah on Nov 1, 2012 3:05 pm • linkreport

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