Author: Ana Stanca
Demand Generation Leader, Enghouse Transportation
Generation Z, also known as Zoomers, is the 16–24-year-old market segment that represent a sea change in American culture.
Zoomers are a generation that have never known life without the internet and smartphones. They live on social media and when it comes to money and finance – they are charting a new course.
And that new course will have an impact on many industries, including the world of public transit, where many states are exploring open-loop payment systems that accept Europay, MasterCard, and Visa (EMV) rather than traditional transit agency fare cards.
That sea change in payment methods will represent a major shift in the industry. Global payments platform Thunes published results of a study of 6,500 Zoomers that aimed to learn how they live their lives and what that means for retailers and other customer-facing businesses.
The Thunes study found that 62 percent of Zoomers do not have a bank account and in some emerging markets nearly 50 percent prefer mobile wallets as their choice of payment method. About 25 percent of Zoomers in western markets almost never use cash.
“We knew that social media would be a key part of a Zoomer’s daily life, but what our survey helped to reveal is the extent to which they are driving spending activity in this demographic. Another important aspect of their lives that we wanted to explore is their relationships with money and their affection for mobile-driven payment methods,” said Thunes CEO Peter De Caluwe. “As a company that embraces the diversity of payments and builds the next-generation payments infrastructure for the world, we will use these insights to shape our payment capabilities and solutions for the large group of the internet businesses that we serve.”
Consequently, many of the Zoomers fall into the “unbanked” category, a growing segment of the U.S. market.
Government agencies are tracking this emerging “unbanked” market. The Federal Deposit Insurance Corp. (FDIC), National Credit Union Administration (NCUA) and Office of the Comptroller of the Currency (OCC) say the U.S. should establish outcome-based performance measures to track progress toward decreasing the unbanked population, according to a recent Government Accountability Office (GAO) report.
The GAO report says roughly 5.4 percent of U.S. households were unbanked in 2019, meaning they did not have any checking or savings accounts with banks or credit unions. However, that proportion is higher among lower-income, less-educated and nonwhite households.
The GAO estimates an additional 17.9 percent of U.S. households are underbanked, meaning that although they have opened at least one checking or savings account, they use alternative financial services like check cashing or payday loans, which are often more costly than banking services.
Some transits are trying to accommodate the “unbanked.” The Los Angeles Department of Transportation (LADOT), for example, is working to serve the unbanked demographic, which accounts for an estimated 20-25 percent of California’s population.
LADOT organized a pilot program through the state’s Cal-ITP program to accommodate low-income riders through the city’s Angeleno card.
The pilot will provide a key test of the Angeleno card, which underbanked, unbanked, and other low-income people use. These riders, who often do not have conventional contactless credit or debit cards, could tap the Mastercard-branded prepaid debit card on bus validators to pay fares.
“Research suggests that more and more Americans use contactless credit and debit cards and digital wallets,” Seleta Reynolds, LADOT’s general manager, told Mobility-payments.com. “Twenty-five percent of Californians remain underbanked or unbanked and are unable to access the digital economy.”
She said without credit or debit cards, these riders cannot use many of the transit options available in Los Angeles.
“The city of Los Angeles provides residents the Angeleno card, a contactless, open-loop payment card and account to overcome these barriers. However, the Angeleno card is not integrated with transit payment platforms and cannot be used on city or regional buses.”
Reynolds said the open-loop fare payments system to be trialed would enable pay-as-you-go fare payments and fare capping, including monthly capping. This would help low-income riders who cannot afford to prepay for monthly passes.
Caltrans formed the Cal-ITP to help the state’s nearly 300 public transit agencies – most of them small bus agencies – to buy the core technology they would need to accept contactless open-loop payments. The state is concluding master service agreements with vendors to supply validators and fare-calculation software and services.
Enghouse Transportation is one of six firms chosen to participate in the Cal-ITP, which will allow transit agencies to procure software solutions through its Mobility Marketplace, which provides transit operators with links to a suite of pre-negotiated, code-compliant products. This simplified and coordinated procurement process will make it easier for transit agencies to sign on to open-loop technologies.
To learn more, download our solution brochure: “Enghouse Transportation transit software: A proven solution at a competitive price” or contact us and book a demo to learn more about our Integrated Travel Project.