What about the Unbanked? Mind the Open-Loop Gap

Author: Ana Stanca

Demand Generation Leader, Enghouse Transportation

One concern regarding Open-Loop Ticketing Systems is the consequences it may have for people who do not use traditional banking services or who don’t have access to smartphones. As transit use still skews towards groups at the lower end of the socio-economic scale, these people are overrepresented among the transit-reliant population.

Research shows that most unbanked people who normally access transit with cash would be willing to switch to prepaid or government-issued cards, and about a third are willing to pay with a smartphone.

What are the statistics?

4% are unbanked with no checking or savings accounts.
9% are underbanked. They may have a bank account but use alternative financial services such as payday loans.
7% are fully banked and use traditional banking services.
15% of the population do not have Smartphones.

What is the way forward?

There are several ways to implement Open-Loop Payment Systems and transit agencies can add new services incrementally. This allows agencies to evaluate their current fare solutions, investment strategies and passenger expectations.

Many are now consulting with peer agencies and industry suppliers to get a good idea of the capabilities, sequences, and options available. Some agencies have launched pilot projects to test new technology on smaller rider segments before moving to full-scale rollouts.

A few resources are available to agencies considering modernizing their payment systems:

The International Association of Public Transport (UITP) in July 2021 launched the Urban Mobility Open Payments Forum, which brings together operators, payment providers, and technology integrators to facilitate an international dialogue on Open-Loop Payments. It has released a white paper discussing open-loop technologies in detail.
See: https://www.uitp.org/publications/open-loop-payment-in-public-transport/
Agencies from any U.S. state can use the California Mobility Marketplace, a resource to help transportation providers modernize with Open-Loop Fare Payments. The marketplace lets agencies shop among prequalified suppliers of transit, processing services and acceptance devices.
See: https://www.camobilitymarketplace.org/go-contactless
Agencies may be able to take advantage of the FTA’s Mobility Payment Integration program, which supports transit providers in developing and testing integrated payment solutions.
See: https://www.transit.dot.gov/research-innovation/mobility-payment-integration-mpi-program
APTA’s Mobility Innovation Hub offers webinars and peer exchanges of documents and data to help agencies explore how others have implemented payment innovations.
See: https://www.apta.com/research-technical-resources/mobility-innovation-hub/

Minding the gap

The emergence and growing adoption of secure and efficient payment technology offer transit agencies an unprecedented opportunity to phase out inefficient legacy systems and allow customers to pay for transit the same way they pay for most other goods and services.

This can deliver a range of benefits both for transit agencies and consumers alike, improving service delivery and passenger experiences, cost savings for agencies and increased ridership. It empowers transit agencies to fulfil their primary purpose of getting people where they need to be efficiently and in a sustainable manner.

Efficient, accessible transit systems create more livable and equitable communities.

Want to find out more?

To learn more about the transition to modern, Open-Loop Payments Systems and the benefits they can deliver, please download our Whitepaper: A Transit Agency Roadmap for Mobile Payment Solutions.

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