Electronic Toll Collection: Technology, Interoperability, and Revenue Leakage

Electronic Toll Collection: Technology, Interoperability, and Revenue Leakage

How ETC Systems Work, Why Interoperability Remains Elusive, and the $2.24 Billion Leakage Problem

A Technical and Financial Guide for Infrastructure Finance Professionals

Prepared by DWU AI

An AI Product of DWU Consulting LLC

February 2026

DWU Consulting LLC provides specialized infrastructure finance consulting for airports, toll roads, transit systems, ports, and public utilities. Our team brings deep expertise in financial analysis, credit evaluation, rate setting, and comparative benchmarking across transportation sectors. Please visit https://dwuconsulting.com for more information.

Changelog

2026-02-23 — Initial publication.

Introduction: The Transformation to All-Electronic Tolling

Electronic toll collection (ETC) represents one of the most significant operational and financial transformations in highway infrastructure management over the past three decades. The shift from traditional toll plazas—where vehicles queued, stopped, and exchanged cash with toll collectors—to fully automated, high-speed all-electronic tolling (AET) systems has reshaped both the economics and the experience of tolled highway travel. This transformation touches nearly every aspect of toll road operations: capital costs, labor expenses, customer service requirements, revenue capture, and long-term financial viability.

For infrastructure finance professionals and bond investors, ETC systems merit serious attention. The transition to electronic tolling directly affects operational margins, debt service coverage ratios, and revenue certainty—the three pillars of toll road credit quality. A toll authority that achieves high ETC penetration and successfully converts to all-electronic operations gains substantial competitive advantages: lower per-transaction costs, faster customer throughput, reduced toll plaza congestion, and improved revenue capture. Conversely, toll authorities that struggle with interoperability, suffer from high revenue leakage, or face costly migration challenges to all-electronic systems may experience margin compression and increased financial risk.

This article examines the technological foundations of modern ETC systems, the complex landscape of major regional and statewide networks, the ongoing (and largely unresolved) interoperability challenge, the economics of converting to all-electronic tolling, and the significant revenue leakage problem affecting toll roads across the United States. Understanding these topics is essential for evaluating credit risk and long-term financial sustainability in toll road finance.

How Electronic Toll Collection Works: Technology and Transaction Processing

Electronic toll collection relies on three primary technologies: radio-frequency identification (RFID) transponders, license plate recognition (LPR), and account-based tolling (ABT). Most modern ETC systems employ a combination of these methods to maximize collection efficiency and accommodate the broadest possible user base.

The core RFID technology used in North American tolling operates on the 915 MHz frequency using Dedicated Short Range Communications (DSRC). A transponder—a small, battery-powered device mounted in a vehicle's windshield—communicates with roadside antennas as the vehicle passes through a toll point. The transponder broadcasts a unique identifier that correlates to a customer account. Modern DSRC systems achieve read rates exceeding 99.8%, meaning successful transactions occur on more than 999 out of every 1,000 passages. Transaction processing is instantaneous: the toll is deducted from the prepaid account within milliseconds. This near-perfect reliability and speed enable toll collection while vehicles travel at highway speeds (35–70 mph), eliminating the need for vehicles to slow down or stop.

License plate recognition (LPR) serves as the fallback mechanism for vehicles without active transponders. High-resolution cameras capture the vehicle's license plate image at the toll point. The plate number is transmitted to a back-office system, where state motor vehicle records are queried to identify the registered owner. A toll-by-plate charge or notice is then sent to the vehicle owner's address. LPR enables toll collection even when a transponder is absent, inoperative, or blocked. However, LPR-based collection is slower, more labor-intensive, and more prone to collection failures due to invalid addresses, non-payment, and disputes.

Video tolling (often synonymous with toll-by-plate) is the process of photographing vehicle license plates and charging registered owners, typically for a single toll event or as part of an account-based system where customers prepay. Some toll authorities employ video tolling as their primary collection method, particularly for occasional out-of-state users who do not maintain a local ETC account or transponder. Account-based tolling (ABT) is a newer model in which customers establish an account linked to their vehicle registration or license plate rather than a physical transponder. Tolls are deducted directly from the account balance regardless of whether a transponder is present. ABT systems, used by some newer toll authorities and international systems, can reduce dependence on physical devices and simplify account management, though they require robust database integration with state motor vehicle registries.

Major ETC Systems in the United States

The United States does not have a single, unified toll collection network. Instead, more than a dozen distinct regional and statewide ETC systems operate in parallel, with varying degrees of interoperability. Understanding these systems is essential for assessing network coverage, operational efficiency, and collection challenges.

System	Primary Service Area	Active Accounts / Users	Operator	Interoperability Status
E-ZPass	20 states (ME to VA, Great Lakes, PA, IL)	35+ million	39 agencies in consortium	Interoperable within consortium
SunPass Pro	Florida	~3 million	Florida's Turnpike Enterprise	Interoperable with E-ZPass (partial)
TxTag / TollTag	Texas tolled roads	~4.5 million	NTTA, TxDOT, regional authorities	Reciprocal agreements (limited)
FasTrak	California	~2.5 million	California Department of Transportation	Isolated; limited agreements
Peach Pass	Georgia (I-75, I-85 express lanes)	~400,000	State Road & Tollway Authority	Limited interoperability
I-PASS	Illinois	~2.2 million	Illinois Tollway	E-ZPass interoperable
PikePass	Oklahoma Turnpike	~600,000	Oklahoma Turnpike Authority	Limited reciprocal agreements
K-TAG	Kansas Turnpike	~350,000	Kansas Turnpike Authority	Limited reciprocal agreements

E-ZPass is by far the largest and most geographically comprehensive system, with 35+ million active accounts across 39 agencies in 20 states stretching from Maine to Virginia, across the Great Lakes, and including Pennsylvania and Illinois. E-ZPass agencies operate within a formal consortium, enabling seamless interoperability for transponder holders traveling across member jurisdictions. SunPass in Florida, originally developed as a proprietary system for Florida's toll network, has achieved partial interoperability with E-ZPass, allowing E-ZPass holders to use SunPass lanes. TxTag (operated by the North Texas Tollway Authority and other Texas entities) serves approximately 4.5 million accounts but maintains limited reciprocal agreements with other systems. FasTrak in California remains largely isolated, a function of both technical and political barriers. I-PASS in Illinois has integrated with E-ZPass, effectively merging Illinois tolling into the larger E-ZPass network. Smaller systems like PikePass (Oklahoma), K-TAG (Kansas), and Peach Pass (Georgia) operate regionally with limited interoperability beyond reciprocal payment arrangements.

The Interoperability Challenge: A Decade of Unresolved Fragmentation

In 2012, the Moving Ahead for Progress in the 21st Century Act (MAP-21) mandated that all toll agencies implement interoperable ETC systems by 2016. More than a decade later, the United States still lacks true national interoperability. A driver holding an E-ZPass transponder cannot use that same device on California's FasTrak or Texas's TxTag systems without obtaining separate transponders and accounts. This fragmentation frustrates travelers, complicates toll administration, and adds operational costs.

The E-ZPass consortium has achieved the most comprehensive interoperability among its member agencies, allowing a single transponder to work across multiple states and multiple toll agencies. This success demonstrates that technical interoperability is achievable but requires institutional alignment, shared governance, and political will. However, extending E-ZPass compatibility to SunPass was a gradual, multi-year process that involved software integration, account reconciliation, and revenue-sharing agreements. Extending compatibility even further—to systems like FasTrak, TxTag, or PikePass—faces substantial barriers.

California's FasTrak remains largely isolated due to a combination of factors: the state's historical development of a proprietary toll system, the complexity of integrating FasTrak with the DSRC-based systems used in other states, and California's preference for maintaining control over its toll infrastructure. However, California has gradually expanded FasTrak compatibility through reciprocal agreements with selected out-of-state systems and is exploring account-based tolling (ABT) models that may facilitate future integration.

The Federal Highway Administration's OneStop initiative, launched to advance national interoperability standards, has made progress in standardizing transaction protocols and account reconciliation procedures. However, OneStop remains a framework for inter-system settlement rather than true end-to-end transponder compatibility. A traveler still must obtain separate transponders or accounts for each major system; OneStop merely ensures that the back-office systems communicate efficiently to settle inter-system revenues.

The political economy of toll system fragmentation is substantial. Toll authorities derive not only revenue from tolls but also float income, interest earnings on prepaid accounts, and administrative fees from transponder sales and account management. Consolidating systems would eliminate some of these revenue streams and require toll agencies to share a portion of customer relationships and account data. Additionally, many toll authorities have invested heavily in their proprietary systems and are reluctant to abandon those investments. As a result, genuine national interoperability remains an aspiration rather than a reality.

All-Electronic Tolling: Economics, Operations, and Equity Implications

All-electronic tolling (AET) represents the endpoint of the ETC evolution: the elimination of all cash collection, toll plazas, and toll collectors in favor of purely automated transponder and license plate-based collection. AET systems collect tolls from every vehicle without requiring the driver to stop, slow down, or interact with any physical infrastructure. Vehicles equipped with valid transponders are charged instantaneously; vehicles without transponders are captured via license plate recognition and billed after the fact via toll-by-plate notices.

The economic case for AET is compelling. A transponder-based toll transaction costs approximately $0.05 to $0.10 to process, including system maintenance, customer service, and back-office operations. A cash toll transaction, by contrast, costs $0.30 to $0.50 to process when accounting for toll booth operator labor, toll booth maintenance, change-making, and cash handling. Converting to AET typically reduces toll operation and maintenance costs by 15–25% while simultaneously increasing toll collection capacity. A traditional toll plaza can process 300–400 vehicles per hour; an all-electronic toll collection point can process 1,200–1,500 vehicles per hour. This capacity increase translates directly into improved traffic flow, reduced congestion, and better operational safety.

The Pennsylvania Turnpike's landmark transition to open road tolling, completed in January 2025, exemplifies the modern AET conversion. Eliminating 47 toll plazas and transitioning to purely electronic collection via overhead gantries reduced the Turnpike's operational footprint, eliminated approximately 400 toll collector positions, and enabled faster, safer traffic flow across the system. New York City's congestion pricing implementation, also launched in January 2025, employed all-electronic tolling ($9 per vehicle during peak hours) with exclusive reliance on license plate recognition, demonstrating that AET can work even in the most densely populated urban environment without any physical toll infrastructure.

However, AET raises legitimate equity concerns. Approximately 6–8% of U.S. households are unbanked or underbanked, lacking reliable access to credit cards or bank accounts necessary to establish prepaid toll accounts. These populations, disproportionately concentrated in low-income and rural areas, may face barriers to using toll roads under AET systems unless toll authorities explicitly design accommodation pathways (e.g., cash payment options at retail locations, phone-based account setup, or subsidized transponders for low-income households). Several toll authorities, including the Pennsylvania Turnpike, have incorporated equity provisions into their AET transitions, including special payment plans and account opening procedures for unbanked populations.

Revenue Leakage: The $2.24 Billion National Problem

Despite the technological sophistication of modern ETC systems, the United States loses an estimated $2.24 billion annually in uncollected toll revenue due to non-payment, payment delays, and enforcement failures. This figure represents approximately 5–10% of total national toll road revenue and poses a material credit risk for toll road bond investors.

The Pennsylvania Turnpike provides a stark illustration of the revenue leakage challenge. Following its transition to open road tolling in January 2025, the Turnpike implemented a toll-by-mail program for drivers captured via license plate recognition. Early data shows a deeply troubling collection rate: only 52.1% of toll-by-mail charges are paid within 150 days of the initial invoice. By implication, approximately 48% of toll-by-plate revenue is either unpaid, unpayable (due to invalid addresses or untraceable vehicle owners), or collectable only through costly enforcement mechanisms.

Nationally, toll-by-plate collection rates vary significantly by toll authority but generally range from 50% to 75% within 180 days of notice, with recovery rates improving only modestly after escalation to violation status. A 2023 survey by the International Bridge, Tunnel and Turnpike Association (IBTTA) found that 23% of drivers admit deliberately delaying toll payment, and 73% of drivers who receive violation notices delay payment further, treating toll violations as lower-priority debt compared to other obligations (such as rent, utilities, or car payments).

State enforcement mechanisms vary widely. Some states impose registration holds on vehicles with unpaid toll violations, preventing license renewal or registration transfer until tolls are paid. Other states employ liens on tax refunds, suspend driver's licenses, or employ collection agencies. However, these enforcement tools are blunt instruments: they affect the vehicle owner but may not affect the actual driver, and they impose administrative costs that further erode toll authority margins. Additionally, enforcement mechanisms cannot recover tolls from unregistered vehicles, vehicles with spoofed or obscured plates, and out-of-state vehicles with no nexus to state enforcement jurisdiction.

The Federal DRIVE Act (Developing Reliable Nationwide Information on the Value of Employment), enacted in 2015, included provisions to establish a national database for sharing toll violation information across jurisdictions. However, implementation has been slow and incomplete, and interoperability between state enforcement systems remains poor. As a result, a habitual toll evader traveling across multiple states can continue to avoid payment if each state operates an isolated enforcement system.

For bond investors, revenue leakage directly reduces debt service coverage ratios and operating margins. A toll authority projecting 10% annual revenue growth but experiencing 8% actual revenue leakage faces a cumulative 18-percentage-point deviation from projections over five years. This underperformance weakens credit metrics and may trigger financial covenant violations. Issuers addressing revenue leakage through enhanced enforcement, account-based tolling, and technology upgrades (such as digital license plates) demonstrate superior credit discipline and deserve credit premium consideration.

Back-Office Operations: Transaction Processing, Violation Enforcement, and Customer Service

ETC systems are not merely collection technology; they are integrated operational ecosystems encompassing transaction processing, customer service, violation detection and enforcement, and financial reconciliation. The back-office operations of a major toll authority can be as complex as that of a mid-sized bank, with customer accounts, transaction ledgers, disputes, refunds, and collections activities.

Transaction processing for a major toll authority involves millions of daily transactions—each capturing vehicle identifier data, toll amount, date, time, and location. These transactions must be recorded, reconciled with prepaid account balances, and settled in real time or near-real time. Payment processing introduces additional complexity: credit card transactions incur processor fees of 2–3%, effectively creating a hidden drag on net toll revenue. A toll authority processing $500 million in annual toll revenue through credit card payments incurs $10–15 million in processor fees alone. Some toll authorities have begun developing alternative payment methods (debit cards, direct ACH transfers, retail payment kiosks) to reduce these costs, but the credit card ecosystem remains the dominant payment infrastructure.

Violation enforcement (processing non-payment notices and escalating to collection actions) represents a substantial operational challenge. When a driver's transponder is inactive or absent, the license plate is captured, transmitted to the back-office system, and cross-referenced against state motor vehicle records to identify the registered owner. A toll-by-plate notice is then prepared and mailed. If payment is not received within a specified period (typically 30–60 days), a violation notice is issued, assessing additional penalties and interest. If the violation notice goes unpaid, the toll authority may escalate to enforcement mechanisms (registration holds, license suspension, collections agency referral). Each escalation step incurs administrative costs: postage, customer service, legal review, and collection agency fees (typically 25–35% of recovered amount). These costs can consume significant portions of recovered toll revenue, reducing net collection efficiency.

The "habitual violator" problem is particularly acute. A small subset of drivers—estimated at 2–5% of the driving population—are responsible for a disproportionate share of toll violations. These drivers may be serially non-responsive to notices, may use multiple vehicles or spoofed plates, or may cross state lines to evade enforcement. Identifying and targeting habitual violators for aggressive enforcement can improve collection rates, but doing so requires sophisticated data analytics, inter-jurisdictional information sharing, and sustained enforcement commitment.

Digital license plates, pioneered in California and Arizona, offer a potential long-term solution to some back-office challenges. Digital plates are electronic devices that display a vehicle's registration information and can be remotely updated or disabled. Theoretically, a toll authority could disable a vehicle's digital plate remotely if tolls go unpaid, preventing the vehicle from being legally operated. However, digital plate adoption remains nascent, and technical, legal, and privacy concerns continue to slow rollout.

Technology Outlook: From RFID to GNSS and Beyond

ETC technology is not static. The next decade will likely see significant evolution driven by advances in positioning technology, vehicle connectivity, and highway automation. Understanding these trends is important for long-term toll road credit analysis and revenue sustainability planning.

The most significant potential shift is from RFID transponders to GNSS (Global Navigation Satellite System) technology, also called GPS-based distance charging. Under a GNSS tolling model, vehicles would be charged based on actual miles traveled on tolled roads, measured via precise GPS positioning. This approach offers substantial advantages: no need for roadside gantries or equipment, elimination of toll plazas and booths, seamless interoperability across state lines and toll systems (since all vehicles would use the same underlying technology), and transparent, distance-based pricing that could accommodate variable rates based on congestion, time of day, or vehicle type. The European Union and several U.S. states (notably Oregon) have conducted pilot GNSS tolling programs. However, GNSS tolling faces significant barriers: privacy concerns (continuous GPS tracking), cybersecurity risks, the need for universal vehicle equipment, and the challenge of transitioning from existing toll infrastructure to a completely new model.

Multi-lane free flow (MLFF) ETC systems represent an intermediate technology that improves capacity and safety by eliminating dedicated toll lanes and allowing tolling across multiple lanes simultaneously. MLFF systems rely on enhanced RFID and LPR technology operating across wider toll collection zones, accommodating high-speed traffic flow. Several U.S. toll authorities are deploying or testing MLFF systems as a step toward full all-electronic tolling.

Vehicle-to-Infrastructure (V2I) communications, a subset of Cooperative Adaptive Cruise Control (C-ACC) technologies, will enable vehicles to communicate directly with toll infrastructure, improving transaction reliability and enabling dynamic tolling based on real-time traffic conditions. As the automotive industry and transportation agencies invest in connected vehicle infrastructure, toll collection will naturally integrate with these systems, further reducing collection complexity and improving revenue capture.

Autonomous vehicle (AV) and connected vehicle (CV) deployment will fundamentally reshape tolling. Autonomous vehicles will communicate with toll infrastructure automatically, ensuring near-perfect toll compliance and revenue capture. Fleet operators will have strong incentives to maintain active toll accounts to ensure seamless operations. Conversely, the rise of autonomous vehicle-as-a-service (AVaaS) models may disintermediate individual vehicle owners from toll responsibility, shifting liability to fleet operators and requiring toll authorities to adapt billing and collection procedures.

Internationally, the European Union's HGV road charging directive and Germany's LKW-Maut (heavy goods vehicle toll) system have pioneered distance-based electronic tolling using GPS and satellite positioning. These systems achieve collection rates exceeding 98% and demonstrate that technologically mature GNSS tolling is feasible. However, U.S. adoption of GNSS tolling is likely to be gradual, driven by state-level pilots and eventual federal policy support, rather than rapid national standardization.

The long-term policy horizon also includes the concept of a nationwide vehicle miles traveled (VMT) fee as a replacement for the gasoline tax and potentially traditional toll mechanisms. A VMT-based system would charge vehicles based on actual miles traveled on public roads, with rates varying by road class (interstate vs. local), congestion levels, and vehicle type. A VMT system could eventually subsume traditional toll revenue, fundamentally transforming toll road finance. However, implementing a VMT system at national scale faces substantial technical, political, and privacy barriers. For purposes of current toll road credit analysis, VMT fee discussions should be considered as long-term policy scenarios rather than near-term threats to toll revenue.

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