Revenue Protection
Description / objective
Effective Revenue Protection is essential to the financial sustainability of any Operator. An efficient and dedicated operator will collect 97-99% of the due revenue. However, it is not unusual for revenue ‘leakage’ to reach 15-20% of all revenues due, and to even exceed 20%. To put this in perspective, such levels of lost revenue exceed the entire vehicle investment program, and if recovered, could be invested in vastly-improved service, with better-paid and better-trained drivers.
In some cases (e.g. European cities) this is reflected in the subsidy levels and the public pick up the tab. It is not unusual for such utilities to impose fares increases or to cut back services in times of restricted financial support, rather than to resolve the problem of lost revenues. In other cases, even private operators consider the situation beyond their capacity, and they enter ‘rental-style’ arrangements with their drivers to receive an acceptable daily income, and let revenue leakage be the drivers’ and conductors’ problem.
All Fare Collection systems have vulnerabilities. Various passengers, company staff and 3rd parties are motivated to try to exploit these vulnerabilities, to either steal money or to save money by avoiding the correct fare payment. Revenue leakage arises in different ways, the most common being:
- Drivers and/or conductors try to conceal part of the fare revenue they collect from the fare collection system – e.g. fail to issue a ticket, issue an under-value ticket, tamper with equipment, use unauthorised tickets, etc.
- Passengers try to avoid paying any fare (e.g. avoid the fare payment point, use an expired or invalid ticket), or pay less the proper amount for the trip they are making
- 3rd parties produce and sell forged or tampered tickets (e.g. weekly travel passes)
- Internal staff establish a fraud at the system and/or accounting level
In some cases, there is collusion between the parties (e.g. passenger gives less than the correct fare to the driver, no ticket issued and driver keeps the money). As the fare collection system deals in cash, which has direct value and is untraceable, the temptation level is high and the integrity of the revenue system is constantly being tested. Thus, revenue protection challenges consist of both the ‘traditional’ forms, and innovative efforts by people who spot a potential system weakness.
The Revenue Protection function needs to be comprehensive, proactive, adaptive, and ‘sentient’. Effective revenue protection consists of four key steps:
- Use all available information to be aware of the nature and broad patterns of any revenue leakage
- Mobilise and effectively deploy well-trained resources to investigate and detect actual occurrences of revenue leakage
- Establish, and consistently utilise effective deterrents, which are appropriate to the person committing the violation
- Maintain effective records to support the deterrents, and to ensure that they withstand any challenge in court or labour tribunal
IT systems can support the Revenue Protection function by the following tools:
- Analysis of short- and long-term revenue trends
- Searches, including time-series analysis, for variances and anomalies and high/low values associated with routes, areas, staff members
- Use of other data sources – e.g. origin-destination surveys – to estimate the probable revenue and compare the quantum and profile to actual returns from the Fare Collection system
- Management of the deployment of revenue protection staff, and ensuring that all routes, areas, personnel and equipment are inspected on a periodic basis according to the risk rating
- Management of the deterrent and penalty schemes, including the maintenance of records for use in court or in disciplinary hearings
- Implementation of various security features to prevent and detect fraud, especially against mass-produced forged tickets and against insider fraud
Technologies, data and resources
IT support for Revenue Protection consists of various software applications. They are primarily concerned with pattern and anomaly analysis, inspector deployment management, and penalty fare records. Computational requirements are modest.
Some Fare Collection systems include utilities for revenue pattern analysis, but generally applications are bespoke and either developed in-house or by a contractor.
Revenue data is sourced from the Fare Collection system (either directly or via the accounting system), including revenue data by route, shift, driver, ticket type profile, average fare, number of cancelled tickets, number of amended transactions, etc. Staff assignment data is received from the rostering system, to assist actions to inspect drivers/conductors of particular interest. Operational data may be sourced from the AVM system.
In some cases, revenue protection inspectors are issued with handheld devices on which they record their activities and waybill details of all vehicles inspected. This data is then transferred to the revenue protection support system.
Advantages and cautions
The primary advantages of ITS-supported Revenue Protection are:
- Full coverage of the entire service (all routes, 24/7 coverage) can be provided as a spin-off from the Fare Collection system, at little or no cost
- Comprehensive time-series patterns and anomaly searches can be performed automatically. Routes, personnel and sectors can be identified for additional inspection.
- Inspection activities can be programmed to ensure that all routes, areas and personnel receive the appropriate level of inspection
- If handheld devices are issued to revenue protection personnel, inspection records can be input automatically and from remote locations, reducing paperwork and eliminating errors
- Management of the paperwork associated with the penalty fare system can be automated, with improved tracking and document retrieval
The primary cautions are:
- Since it is automatic, there may be a ‘disconnect’ by those analysing and using the data, so that they may not notice errors and fail to test its integrity.
- In particular, analysts may become ‘comfortable’ with revenue values (e.g. revenue per shift per route) and assume that it is correct because it is consistent with previous values. In fact, the patronage and due revenue could be growing on that route, and some personnel may have spotted the opportunity to pocket the growth amount
- The users of the reports can sometimes think that the report production is the main objective, and limit their activity to monitoring the information. They can lose sight of the fact that the main purpose of the information is to support intervention for improvements.
- The increase in prepaid ticketing often means that the cash collected on vehicles or at stations is a relatively small and quite variable portion of total revenue. This can make it more difficult to identify the baseline pattern and detect anomalies
- New forms of fraud are always possible. An emerging challenge is the growth of e-ticketing and use of mobile phones and other devices for fare payment. The embedded technology is highly complex and rarely understood by bus company personnel – indeed, it may be proprietary and hidden from them. The potential frauds have yet to be properly understood and the necessary corpus of experience is still in development.