Open-loop payment preferences in public transit: Exploring alternatives to cash for unbanked riders

Transit providers in the US and abroad are adopting open-loop payments; these systems accept credit and debit cards as well as other digital forms of payment at boarding or fare gates and do not require an agency-specific card or app. Fares are paid directly from a traveler’s existing account or card. Though these systems offer improved convenience and efficiencies, they might not be accessible to those who do not have credit or debit cards, or traditional bank accounts, i.e., the unbanked. At the same time, those who are unbanked are more likely to be lower income and of racial minorities. Similarly, these groups have higher proportions of transit-reliant individuals and households. This paper investigates the factors contributing to payment preferences of transit travelers when considering an open-loop payments system. In particular, the role of being unbanked in preferences for alternatives to cash. Using intercept survey data collected from approximately 200 individuals in Northern California, this study evaluates the payment preferences of transit users, paying particular attention to how being unbanked factors into preferences related to using various means of payment for public transit – at boarding. The results presented here suggest that being unbanked impacts the payment preferences of individuals, but familiarity, measured by past use, with different payment tools is also an important predictor. As more agencies adopt open-loop payments, recognizing the preferences and the abilities of unbanked travelers will help ensure that new systems are accessible to all travelers, even those with fewer financial tools.