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Monterey-Salinas Transit is neither the smallest nor the largest among California’s 300+ transit operators, and its domain neither fully urban nor rural. Its ridership is a true cross-section of California: Salinas Valley farmhands, affluent Big Sur tourists, San Jose airport travelers, plus military members, college students, hospitality workers and more, all shuttling around a 295-square-mile service area. (At least in pre-pandemic times, before ridership dropped nearly 50%.)
It was those microcosmic characteristics that positioned MST to take a leading role in California’s effort to modernize how residents pay for transit. Targeted to launch in February pending contracting details, a six-month demonstration across the agency’s 160-bus fleet will let passengers pay for rides using contactless credit or debit cards and enabled mobile devices. Instead of feeding bills into fareboxes or standing in line to buy payment cards, riders can just tap their card or phone to contactless readers aboard MST buses.
In the midst of a pandemic that could have a lasting impact on transit’s future, officials see the pilot as a small step toward improving transit’s consumer appeal. The pilot’s details could also help connect unbanked communities to payment accounts, and potentially other social services.
“Why is it that we can use the same debit card to buy a taco in Monterey, the Bay Area, or London, yet if I’m buying transit, my wallet needs a million separate cards?” said Carl Sedoryk, the executive director of MST. “Now, you’re going to be able use the same card to buy transit. If that really takes off, we think there could be a lot of side benefits.”
Officials see the “open loop” payment technology that’s being tested in Monterey-Salinas as key to lowering barriers. It’s been long seen as the industry’s wave of the future:London’s public transit system launched open-loop payments in 2012. But the model has been slow to spread among U.S. operators. Agencies can be hamstrung by long-term equipment contracts, and banks have lagged on issuing contactless cards. The U.S. cities that were first to adopt the technology — Chicago and Salt Lake City — struggled to achieve high rates of adoption.
Yet as contracts and equipment reach expiration dates, more American operators are moving to open-loop, particularly as the pandemic underscores the appeal of a touch-free experience and consumers become more familiar with mobile and contactless payments. In late December, New York City announced the complete rollout of its contactless payment system, OMNY, on all of its buses and subway platforms. It makes New York’s MTA one of the world’s largest transit systems to offer riders the option to pay with Apple Pay, Google Pay, contactless bank cards or special-purpose OMNY cards. Straphangers are still able to swipe the familiar magnet-striped yellow Metrocards until at least 2023, but rider adoption is ramping up quickly: Roughly 10% of riders are already using the new option, with more than 200,000 taps per day in early January, according to Al Putré, executive director of the OMNY Fare Payment Program at MTA.
Smaller agencies are also making recent moves away from specialized fare media. In Texas, Austin’s Capital Metro intends to migrate over to a fully open-loop system that accepts smart bank cards and recently rolled out machines that read mobile payments via a CapMetro app as part of that long-term plan. In 2019, Dayton, Ohio, installed validators that charge riders via the Transit app. In Portland, Oregon, Trimet’s Hop system hasaccepted Apple Pay since 2019, and before that was world’s first transit operator to issue farecards via Google Pay.
The tide is now turning in California, most prominently in the Bay Area, where the board of the Metropolitan Transportation Commission, which oversees transit across the nine-county area, voted to make theregional Clipper card system eventually accept open payments. The Monterey-Salinas pilot is part of a statewide program housed within CalTrans called theCalifornia Integrated Travel Project, which aims to help smaller and mid-sized agencies make similar upgrades as well. Cal-ITP recently launched anonline marketplace where local transit providers can procure validators and other equipment at discounted rates negotiated by the state. If open-loop systems are more widely adopted, as is the program’s larger goal, it could smooth the friction of making trips across the patchwork of systems within the state or many metros.
Once the pilot begins, MST and Cal-ITP staff plan to monitor the share of riders that use the new payment format. (Paying for rides with cash and old agency fare cards will continue to be an option.) Apart from the touch-free convenience, Sedoryk hopes that riders are drawn to the fact that the new open-loop system will offer fare capping, which sets a weekly or monthly limit to how much an individual rider can be charged. Common in European and Asian cities, it’s a policy that transit advocates argue saves money for low-income riders who purchase trips on an individual basis.
The pilot will also seek new ways to include people without bank accounts, who make upnearly 6% of the state’s population. One way is to issue contactless debit cards and digital transaction methods to riders by setting them up with Square accounts, which require no banking history, Sedoryk said. Those accounts could be used to make deposits and payments anywhere the cards are accepted, including transit.
“A criticism of using bank cards for transit is that not everyone has a bank card,” said Gillian Gillett, the program manager at Cal-ITP. “So we’ve turned that question on its head and said, OK, then everyone should have one.” As it is, a majority of low-income adults in the U.S. have smartphones. Square and other financial technology businesses offer a product that helps fill the payment account gap, she said; in her mind, now it’s a matter of marketing it.
Connecting more unbanked and underbanked riders to account-based payments could one day expand access to other government-provided services that are also complicated to navigate. “The fact that you can integrate across transportation modes means you can also integrate across other things, like social programs,” Gillett said, pointing to SNAP, rental assistance, or Covid relief as examples. “A lot of those social programs are also delivered on bank cards that are closed-loop — those could be integrated into your account over time.”
Virtually all agencies moving towards open-loop and accounts-based fare systems have plans to include unbanked and underbanked riders. In Austin, such passengers can opt to purchase prepaid farecards or load up mobile accounts with cash at a retail location, said Reinet Marneweck, chief financial officer for Capital Metro. Following the example of Portland’s Hop, New York will sell reloadable prepaid OMNY cards across a network of transit stations, pharmacies, bodegas and other storefronts. Transit technology leaders there have also started to consider how transit accounts could act as a connection point for other social services, though there’s no specific plans for that at this point. “I can’t say for sure how that goes or where that goes, but the technology exists for us to do things we don’t do today,” Putré said.
No matter how “seamless” a new technology promises to be, consumer-facing platform overhauls are bound to involve plenty of friction, requiring agencies to educate the public and keep both new and old systems running for a transition period. With transit ridership anticipated to remain low even after a national vaccine campaign — and many Covid-era service cuts still in place — how quickly and widely open-loop payments will be adopted is unclear. Some are optimistic: Dan Sanford, Visa’s head of consumer payment products for North America, said that he believes a long-term trend towards working from home may mean riders are less likely to buy monthly passes and more likely to want to pay per trip — jibing with the systems like the ones New York and California are testing. “The pandemic has increased the perception that buying transit fare like you buy a coffee is here to stay, and will increase in the future,” he said.
On the other hand, while some operators have seen increased adoption of mobile payments during the pandemic, Candace Brakewood, a professor of civil and environmental engineering at the University of Tennessee in Knoxville, believes that cash payments have also remained strong. “It’s anecdotal, but many agencies were seeing quite a lot of cash payments coming in, presumably because people riding the system during shutdowns were essential workers who don’t have access to various technologies,” she said. How that split distribution will play out once more people resume commuting remains to be seen.
For transit agencies staring into a financial abyss, could smoother fares help to lure people back on the bus? While some industry observers argue that streamlined payment and tech-ified navigation apps help transit compete withprivate companies vying to become multimodal transportation outlets, Brakewood said she didn’t know of any research-based evidence that supports the idea. Others contend that service improvements and street design changes go much further to move commuters out of cars. In a post-pandemic landscape, Sedoryk thinks the answer must be all of the above.
“If we want people to come back to us, we have to make it easy and safe,” he said. “We think this technology does both.”
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