No Quarters for the Meter? No Problem

Moving from concept to concrete can be difficult, especially in a market dominated by a few companies like Cale Parking Systems USA, Duncan Parking Control Systems and POM Inc., which work with thousands of municipalities nationwide. Marketing a card meant getting the meter manufacturers to come to the table its like dealing with the Hatfields and the McCoys, Mr. Regan said. But he was determined.

The parking industry generates approximately $28 billion annually, according to Kim E. Jackson, the president of the International Parking Institute in Fredericksburg, Va. Although the group does not tally parking meter revenue separately, Ms. Jackson noted that more than 3.5 million meters are on the streets nationwide. Over the last 10 years, other companies have begun marketing a range of cashless payment options including smart cards for parking.

Mr. Regan stumbled upon the idea. He was heading to a meeting at a Wells Fargo bank in San Francisco when a guard delayed him. As Mr. Regan, who worked for an electronic payments company at the time, grew impatient, the man behind him, who worked in the smart card industry in Ireland, struck up a conversation.

He asked if I had ever looked at the parking meter industry, which he told me was a $7 billion business, with more than $3 billion collected in quarters every year, Mr. Regan said. I knew it was a sweet spot, but I didnt know it was that large.

European countries, the man told Mr. Regan, had largely abandoned coin-operated meters for systems that employed smart cards.

The conversation, Mr. Regan said, started my wheels spinning and soon led to a business fraught with challenges, including breaking into an area that was controlled by municipalities as well as parking meter manufacturers.

It is difficult to get people to cooperate on unified systems, since everyone has to agree to accept the same card, said Michael I. Shamos, a computer science professor at Carnegie Mellon University. But it is the easiest thing in the world to use; its just hard to get everyone to accept it.

Mr. Regan, who had worked for Visa in its smart cards division before joining Arcot Systems, the electronic payment company, was not deterred. He continued to mull over his chance discussion.

By early 2003, he had left Arcot to become a consultant. A Boston headhunter called him and introduced him to Gerard Kiley, who essentially was in the business of starting businesses. Although they differed on what to pursue, Mr. Regan said his idea a preloaded smart card that would work for parking meters as well as with local merchants won the day.

Over the course of the next year, two other men joined the entrepreneurs to form Parcxmart Technologies. They couldnt afford offices, so we alternated kitchens so our wives wouldnt get too mad at us. It was a high-risk environment and it could get pretty tense, Mr. Regan said.

Because it took months to receive their first round of financing from angel investors, the men used their own savings to travel to Europe to evaluate similar systems and ultimately to license the technology. Mr. Regan said that he did not receive a paycheck until December 2003, nearly a year after he started the company.

Two of the giants in the industry MasterCard and American Express have not yet entered the market, but MasterCard, along with Citibank, announced in July a pilot program to use smart card technology for the New York City subway system. Visa International has, however, begun to explore the on-street parking market. A small number of kiosks in New York, Chicago, Seattle, Houston, Los Angeles and Providence, R.I., accept Visa cards for on-street parking, said Visas senior vice president for innovation, Niki Manby. Its a nascent area, but emerging quickly, she said.

I.B.M. has also developed software for use in a parking system developed with Digital Payment Technologies, a company in Vancouver, Canada, that markets parking payment stations. The system, which was introduced at the University of California, Santa Barbara in 2003, allows users to set up an account with Verrus, a cellphone provider also based in Vancouver, then call in a parking spot number when they are about to leave their cars.

According to an engineer, Dane Dixon, the system will call your phone and tell you that time is about to expire. You can either let it expire or extend it. And if youre leaving early, you can call and tell the system that youre leaving. That way, users dont pay for parking time they dont use.

An I.B.M. spokeswoman said that 47 parking systems nationwide currently used some form of the pay-by-cellphone technology.

According to Ms. Jackson, these types of payments reflect the trend in the industry moving from cash to cashless for on-street parking meters as well as off-street parking in lots. As an industry, we are following what our consumers are asking for not having to carry cash.

But it has not been an easy sell. A report from the Smart Card Alliance, a trade organization based in Princeton Junction, N.J., found that these programs met with limited success due to a variety of operational challenges, which included customer acceptance, availability and inability to use the cards throughout an area.

Ellis McCoy, the parking manager for Portland, Ore., for example, said that while the city had used a different smart card for parking beginning in February 2003, it was only available at two municipal offices. The previous card was well received by customers, but the biggest challenge was marketing and distribution.

It was clear that Mr. Regan had to convince a municipality that his card could overcome those problems, especially when use entailed purchasing new parking meter equipment. Parcxmarts break came from New Haven, the first city to adopt the card. Paul Wessel, who had recently taken over as the director of transportation for New Haven, had seen the card at a trade show. He liked the Parcxmart product, he said, but did not want to gamble New Havens money on something untested. So he negotiated with Mr. Regan to set up a trial run.

I said to them, I want to see your program and its not functioning anywhere, so lets do a pilot project, but if I have to give you money, I need to go to our legislative body and that will delay us six to nine months. Parcxmart agreed, even forgoing a 10 percent commission until New Haven finally decided to adopt the technology, Mr. Wessel said.

Because Mr. Wessel did not like the logo Parcxmart suggested, the company agreed instead to make the card a New Haven-branded card, with the likeness of the city on its face. By September, the card will be usable at more than 3,000 meters throughout the city, Mr. Regan said, and is already being sold by more than 30 merchants from bookstores to restaurants a number he expects to increase in the next few months.

The card is also in use in Truckee, Calif., and was introduced yesterday in Bridgeport.

Mr. McCoy of Portland said his city had already bought new Cale meters and that he planned to introduce the Parcxmart card there as well.

Nonetheless, Parcxmart, which now has Heartland Payment Systems, a New York Stock Exchange-traded company, as a strategic investor, is unlikely to be profitable until 2009. The wild card, as with any start-up, is whether established payment companies, like Visa and MasterCard, will become major rivals.

But Mr. Regan is sanguine. Big-name competitors, he said, ultimately could provide an exit strategy.