A cash-free future begs you to take my money.

Why are you still depending on cash, token, or paper pass systems?

By Matt Schroeder
Director of Marketing, ETA Transit Systems

Here’s a sobering statistic for you: 83 percent.

When asked as part of our 2018 Transit Agency survey, that’s how many transit agencies stated that their operations were not set up for smart payment or cashless systems.

Here’s another interesting statistic: 89.6 percent.

As part of our 2017 transit rider survey, that is the percentage of riders who stated they preferred some sort of cashless fare. Only 10.3 percent preferred a cash exchange for transit fares. Additionally, according to the 2019 national transit database, 87 percent of agencies offering fixed route bus services accepted only cash, metal tokens and paper-based passes and transfer slips. 

It is a head-scratching situation to see how few agencies are prepared for a cashless future.  It’s especially interesting how the number of transit agencies prepared for the age of digital transactions is a mirror opposite of what their customers prefer. It seems like a tremendous disconnect between what the industry is supplying and what the marketplace wants.

Understandably, there are obstacles to achieving a cashless future.

• Demographics
• Cost
• Connectivity
• Security
• Legislation

Those are five substantial concerns, but they are all immediately solvable with the right focus and solution. Delerrok Chief Product Officer Gary Yamamura states “The biggest obstacle is ‘Title VI’—a set of regulations requiring equal access to public transit services.:

According to Yamamura, this can be solved a few different ways:

• Fare capping: Eliminating the need for advanced purchase of an expensive pass
• Expanding the sales network: Eliminating the access constraints associated with sales only at agency ticket windows.  By enabling online, self-service purchases (e.g. mobile, website) and purchases at a widely disbursed network of distributors, passengers can choose the sales channel that works best for them.
• Distributing free or very low-priced cost smart cards and free mobile apps
• Distributing low cost, disposable, electronically validated fare media for use by infrequent riders and tourists

What is more, the need for cashless fare systems is only going to grow as society continues to embrace a connected digital lifestyle. It probably comes as no surprise that the public transit industry in general moves a bit more slowly to adopt new features and technologies—by our estimation, the market runs about 10 years behind current technical capabilities.  We do expect that the 2020 COVID-19 pandemic will bring increase interest in cashless fare option, as agencies look to adopt solutions that help enhance the safety of passengers and staff alike.

Another concern—rider demographics—would seem to be the obvious objection to cashless payment systems. After all, 55-percent of public transit users report an annual household income under $50,000; with 33 percent earning under $25,000 per year*. It would not be a huge leap to assume that low-income demographics wouldn’t have a smartphone, yet according to a February 2019 study by Pew Research Center 71 percent of this audience does own such a device. When asked about these findings, Yamamura offered “our extensive experience suggests that most passengers prefer to not use their smartphones for paying fares. Rather we see mobile as one of many options available—such as contactless smartcards—that provide an attractive, low-cost solution for simplifying payment while minimizing contact and providing a broad range of options to an economically diverse ridership.”

* Source: APTA Who Rides Public Transportation 2017

A few factors that will likely fuel this revolution:

• Smartphone adoption by demographic (as of 2018)
  • 81 percent of Americans own a smartphone (up from 35 percent in 2011)
  • 89 percent of Americans between 18-64 own a smartphone
  • 71 percent of Americans who earn less than $30,000 per year own a smartphone
  • 69 percent of Americans with a high school diploma or less own a smartphone
  • 71 percent of Americans living in rural areas own a smartphone
  • 83 percent of Americans living in urban or suburban areas own a smartphone

Source: https://www.pewinternet.org/fact-sheet/mobile/

• Wearable smart device usage by demographics (as of 2018)
  • 51.9 percent of Americans use a wearable device (e.g. smart watch or accessory with embedded electronics)
  • 38 percent of Americans aged 25-34 have a wearable device
  • 6.5 percent of Americans ages 55-64 have a wearable device
  • 13.2 percent of Americans over the age of 64 have a wearable device
  • By 2019 an estimated 50.6 percent of Americans will own a smart watch
  • By 2022 the percentage of Americans with a wearable is estimated at 67 percent

Source: https://www.emarketer.com/content/wearables-2019

• Trends in cash transactions (as of 2018)
  • In 2008, six out of 10 transactions involved cash
  • In 2018, only three out of 10 transactions involved cash
  • By 2028, it is estimated that only one out of 10 transactions will involve cash
    https://www.forbes.com/sites/danieldoderlein/2019/03/18/moving-towards-a-cashless-society-in-a-cash-reliant-world/#120f0cc9236a
    
• Deployment of autonomous driving vehicles
  • Autonomous vehicles will drive the need for cashless payment systems
  • In 2018, 52 percent of transit agencies stated they expect to begin procuring self-driving vehicles within three to five years

Clearly technology is a driving force behind the movement toward a cashless fare payment future. This understanding drives new questions about both available solutions and preferences in payment favored by riders and agencies alike. Among the current options, are:

• Pre-paid pass purchased from kiosk or website
• Smart device payment (e.g. ApplePay®, GooglePay®, etc.)
• Credit/debit card
• Smart cards
• QR codes

In our opinion, the best solution is one that supports multiple payment options, including those for smart devices, wearables, and contactless smartcards. Delerrok’s TouchPass system is an example of a solution that is designed to facilitate multiple payment methods.

Versatile payment collection capabilities simplify payment and meets the preference of the rider. While regular transit riders will likely stick to a single form of payment for their transit fares, periodic or impromptu riders will require flexibility in their fare transactions.

While cash payment will remain a necessity for the foreseeable future, the use of physical currency will be on the decline as transit agencies look to embrace a streamlined future of digital exchange.

What plans does your agency have to meet a cashless future?