270 lines
14 KiB
Plaintext
270 lines
14 KiB
Plaintext
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DEVELOPMENT OF AN ELECTRONIC TOLL COLLECTION SYSTEM
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PHASE I: TECHNOLOGY INVESTIGATION AND CONCEPT DEVELOPOMENT
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Scope of Research Scope of Research
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This report summarizes the research conducted by the
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Advanced Transaction Systems Group (ATS). The research
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findings reported here relate to the regulatory and the
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operating requirements of the financial services provider
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that would have to be considered in the design of an
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electronic toll system. This objective is to satisfy a
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requirement in the Battelle proposal calling for;
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"an examination of the regulatory aspects that must be
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designed into the system so that it will be accepted by
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customers and financial institutions,as well as being
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accepted by local,state and federal authorities".
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This report will focus on the financial institution
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requirements for participation in an electronic fund
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transfer system (EFTS). Consumer implications will be
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mentioned where appropriate.
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Research Scenario
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In pursuing the examination of EFT regulatory
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implications for the design of the proposed Winko-matic
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electronic toll collection system (AVI) we assumed two
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possible operating states. They are the following;
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Operating State One.
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* To operate within an electronic fund transfer
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network owned and operated by a depository institution.
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Operating State Two.
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* Operate a third party system or private network with
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a financial relationship to a depository institution.
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Overview of EFTS Requiremants
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Participation in a payment system of the United States
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requires that the entrant abide by the laws established
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under various banking acts and interpreted under commercial
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law codes. Many of the rules and operating procedures for
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the U.S. payment system were developed at a time when the
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system was based on the clearing and settlement of paper
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credits and debits. Therefore, when the system moved from a
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paper based, manual and batch processing orientation into a
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system dominated by telecommunications and computer
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technology many of the operating rules were maintained and
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did not cause any significant operating problems. However,
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other rules presented problems and required that a new body
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of law be established for handling electronic financial
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transactions.
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For example, the most popular form of bill payment is
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made possible through the demand deposit account. Over the
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years, the body of law for the paper based checking account
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has institutionalized such features as;
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1. return of cancelled checks to the customer,
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2. stop payment features,
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3. account security using signature verification,
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4. practice of float management.
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With the appearance of electronic fund transfer systems
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banks are faced with the challenge of maintaining the
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features of the paper based system while at the same time
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trying to capture the benefits of online computer systems.
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For example, a debit card transaction is, in reality, an "
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electronic check". But how does one design features such as
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acceptable customer verification,stop payment
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orders,recording of the transaction and preservation of
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float management. In addition,a paperless payment system
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brings about new issues such as the use of electronic codes
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for signatures, reconciliation of disputed transactions,
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assdurance of customer privacy and security.
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Resolution of these issues were made possible by the
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passage the passage of THE ELECTRONIC FUND TRANSFER ACT OF
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1978. Attention is called to the following definition of an
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"electronic fund transfer" as found in the Act.
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" any transfer of funds,other than a transaction
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originated by check,draft or similar paper instrument,or
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computer magnetic tape so as to order,instruct,or authorize
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a financial institution to debit or credit an account. Such
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terms includes, but is not limited to, point of sale
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transfers,automated teller machine transactions, direct
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deposits or withdrawal of funds, and transfer initiated by
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telephone."
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In addition to the 1978 Act, payment system transactions are
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covered by the following rregulations or guidelines;
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1. Comptroller of the Currency:Consumer Protection
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Guidelines (Banking Circular # 66).
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2. Federal Home Loan Bank Board:Remote Service Unit
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Regulations 1978.
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3. Various state electronic fund transfer laws. ( About 15
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states have enacted EFT laws ).
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4. Other consumer protection laws.
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a. Truth in lending Act
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b. Fair Credit Billing Act
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c. Equal Credit Opportunity Act
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4. Fair Credit Reporting Act.
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The 1978 Act was ammended with an all encompassing consumer
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protection piece of legislation called REGULATION E which is
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designed to cover combined EFT/credit transactiions. IN
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brief, REG E pertains to;
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"electronic fund transfers that also involve credit
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transactiions made under an agreement between a consumer and
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a financial institutiion to extend credit when the
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consumer's account is overdrawn (overdraft line) or to
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maintain a specified minimum balance"
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5. The U.S. Uniform Commercial Code ( Law of Check
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Collectiions, Bank/customer Realtionships, and Credit Cards.
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Scenario State One-The Proprietary Bank Network Option
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The decision to integrate the electronic toll system
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into the EFT network of a depository institution requires a
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commitment be made to operate according to the rules and
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procedures of the financial service provider. That is,
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according to the EFT Act ofd 1978 and the other regulatory
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requirements of federal and state agencies. In addition,the
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EFT provider may have certain operating rules peculiar to
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the network and have a fee schedule that is sensitive to
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usage and reflective of level of service chosen. In brief,
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the EFT provider sets the operating and business environment
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for the network and there may be very little flexibility to
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recognize the unique needs of the toll road operator.
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Specifically,the following features would have to taken
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into account in the design of an electronic toll road
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system.
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1. An deposit account would have to be established with the
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financial institution. This account would have to have the
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proper EFT access relationships established.
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2. The customer would either select or have computer
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generated personal identfication number .
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3. The use of the service for toll road services and
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transactions would have to explained by bank personnel.
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4. The system would have to accommodate the need for account
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validation,customer verification and issuance of a reciept
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at the completion of the transaction.
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5. Provision for account reconciliation procedures such as
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settlement of disputed transactions and reverse payments
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would have to be accounted for in the system design.
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6. Customer statement account would need to carry special
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codes to designate toll road transactions.
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The direct participation in an EFT network does carry
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significant benefits that are worth considering. Perhapos
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the most important is the utility and the acceptability of
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the the bank card. Consumers are interested in a card that
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can be used for a wide range of financial services and is
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universally accepted by all merchants.
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Participation with an EFT network provider brings the
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benefits of possible relationships with Visa, Mastercard,
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American Express, Carte Blanche or a local debit card. A
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card that carries a high perceived value by the consumer
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will have a greater potential for high usage in the toll
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system.
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However, such participation may come at a premium price
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that may be to high and cannot be accepted. Abiding by the
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rules of the EFT network provider may significantly affect
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the design of the electronic toll system. The economics of
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the participation may also affect the business case for the
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venture. As a result, we may have to consider another EFT
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arrangement that allows for more flexibility in the design
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of the AVI system and shows the economic potential to the
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Authority and, most important,improves the business case for
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Winko-Matic.
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Scenario Two : The Private Network Option
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The greatest amount of system design flexibility is
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offered by what we call the private network option. Under
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this scenario, the network operator is responsible for
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developing and implementing the operating rules and
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procedures for the electronic toll system. In our case,the
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AVI system operating features would be developed by Winko-
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Matic based on the requirements of a public transit
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authority.
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Assume that the Authority is interested in increasing
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toll revenues and reducing operating costs by using an
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electronic toll collection system. The revenue objective can
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be met by a new pricing policy and offering better service.
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For example, the ability to offer time-of-day pricing
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alternative to the static fee schedule currently in place
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has the potential to increase revenues and improve traffic
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management. The user of the toll road would view this
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service as worthwhile and if shown to be cost effective the
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user would see it as having a high perceived value.
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The AVI system design would,therefore, have to satisfy
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the following requirements;
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1. Increase revenues by means of new pricing alternatives.
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2. Improve service by faster user throughput.
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3. Reduce or eliminate revenue leakage.
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4. Improve traffic management.
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5. Offer more cost effective services to wholesale
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customers.
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6. Reduce labor and physical plant costs.
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7. Expand services to the retail customer.
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Any attempt at designing the AVI system demands that we
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determine the costs and benefits stream accruing to each of
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the parties involved. That is, the technical design of the
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AVI system is directly dependent on how much the user is
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willing to pay for the service and whether the Authority can
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achieve their revenue and cost reduction objectives.
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Therefore,the final design of the system can only be
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accomplished when a thorough economic analysis and solid
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business case can be made to the Authority.
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Summary of Findings
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Based on the analysis and research conducted thus far
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the ATS group submits for consideration the following
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findings;
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1. Proprietary EFT network providers offer an attractive
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payment service option.
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2. Participation in such bank networks place severe limits
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on the design of an electronic toll system.
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3. A private or custom designed electronic toll system
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offers the greatest design flexibility.
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4. The benefits and costs of the system features must be
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identified and quantified.
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5. An economic analysis must be performed before a final
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system design is completed.
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6. A decision cannot be made until a business case is
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presented to Winko-Matic.
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Downloaded From P-80 Systems.....
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