The blog of the Urban Institute
July 2, 2020

How Transit Agencies Can Transition to Contactless Payment without Leaving Anyone Behind

July 1, 2020

The novel coronavirus has upended public transit across the nation. Ridership has plunged as much as 95 percent as agencies have cut routes and restricted ridership to essential workers, resulting in a challenging financial situation for public transit—to the tune of billions of dollars in losses.

Naturally, transit agencies are looking to assure riders they are taking every precaution to prevent the spread of coronavirus. To assuage rider concerns that the virus can live on surfaces for multiple days and to avoid increasing maintenance costs for old payment infrastructure, a number of transit agencies have considered or are transitioning to contactless payment systems. A rider with a smartphone and a mobile application would simply wave their phone over a sensor to pay for their trip, eliminating the need for cash or a transit card and reducing the number of surfaces that need to be touched.

However, not all riders—especially those from lower-income households—have a bank account or a smartphone, and they still need to use transit to get to jobs, hospitals, grocery stores, and more essential destinations. So how can cities incorporate contactless payment into their transit systems while preserving safe, affordable transportation options for lower-income households? 

How some cities have integrated contactless payment systems

In the United States, a number of transit agencies have transitioned—or are taking steps to transition—to contactless payment, citing a desire to improve the transit user experience (PDF) and to eliminate payment system maintenance costs.  

The San Francisco Metropolitan Transportation Commission awarded a $461 million contract to Cubic Transportation Services to upgrade its transit fare system. The system will include a mobile app that will allow riders to pay fares and reload accounts with mobile devices and integrate bikesharing and paratransit.

In the New York City region, the Metropolitan Transportation Authority (MTA) will fully switch to OMNY by 2023. The system, which launched in 2019, will allow riders to use their smartphones to tap and pay for any MTA-controlled transit mode.

In Chicago, Ventra accepts standard contactless payments for fares right at the turnstile or bus reader, from mobile wallets and pay apps to contactless bankcards such as Apple Pay, Google Pay, and Samsung Pay.

Many riders could be left out

Those without a smartphone or bank account could find themselves unable to pay for transit if the transition to contactless payment does not account for their situations. According to the Federal Deposit Insurance Corporation, 6.5 percent of the US population did not have access to a bank account in 2017. Unbanked rates were higher among low-income households: 25.7 percent of households making less than $15,000 and 12.3 percent of households in the $15,000–$30,000 income range were unbanked.

These households also have the lowest smartphone ownership rates. According to the US Census Bureau, only 55.4 percent of all households making less than $25,000 owned a smartphone in 2016.

At the same time, lower-income households rely more heavily on public transportation than higher-income households. Research from the Federal Highway Administration finds that households at or below the federal poverty level take about three times as many transit trips as those making more than $100,000 a year.

How transit agencies can accommodate riders without bank accounts or smartphones

Transit agencies can avoid leaving behind users without smartphones or bank accounts as they upgrade their fare systems to contactless platforms through the following:

  1. Providing options to pay for or reload transit cards in cash. To date, the World Health Organization has yet to issue warnings about the use of cash and coronavirus transmission. Agencies should continue to allow riders to pay in cash (PDF) to reload transit cards via vending machines or an outside retail network. In Los Angeles, where the transit agency is upgrading its fare system, unbanked users will be able to refill their virtual accounts with cash at neighborhood convenience stores.
  1. Allowing prepaid cards to operate with tap services. Prepaid, bank-branded cards are another option for riders if they do not have a bank account or a smartphone. Transit agencies could partner with a prepaid-card program manager to provide prepaid cards to the agency's unbanked ridership, or they could issue privately labeled cards in partnership with a bank and processing company.
  1. Providing protections for a negative balance. Riders using prepaid or reloadable transit cards may run into situations where a transit fare is higher than the amount left on the card. This negative balance could prevent a rider from exiting the station. Transport for London implemented a solution in 2014. Termed “One More Journey,” this policy allows a rider to take one more trip on a bus when they have a negative balance. 

The American Public Transportation Association states that “public transportation transforms communities and the lives of the people living in them by spurring economic development, promoting sustainable lifestyles, and providing a higher quality of life.” Even as transit systems undergo technological change, agencies should explore strategies to ensure riders without bank accounts or smartphones can still access transit when they need it. Everyone deserves access to transit, no matter what the future looks like.

People wearing masks wait on a crowded subway platform on May 30, 2020 in New York City. (Photo by Alexi Rosenfeld/Getty Images)

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