Ticketing and payment systems in public transport have evolved dramatically in recent decades, creating a radical shift in how transit agencies handle fare collection. Technological advancements have allowed transport authorities to move away from old and outdated systems that use cash, paper tickets, closed-loop, and card-based transactions. Conventional paper tickets typically sold at vending machines, counters, or by transit staff are replaced with Automatic Fare Collection (AFC) systems, including Closed-loop Smart Cards. This transition is fuelled by increasing passenger demand for more seamless and convenient transit experiences that better cater to their evolving needs. Tap-to-ride technology has made it possible for riders to use their existing bank cards or mobile wallets onboard public transit systems, giving them authority over how they choose to pay for fares. Visa’s Future of Urban Mobility Survey indicates that over 91% of riders expect contactless payments to be offered by public transport authorities, while nearly a third of respondents cite that they are more likely to use public transportation in the future because of contactless payments. Digital payment solutions have become a crucial component in making urban mobility more efficient, sustainable, and appealing to citizens and visitors alike. While digital payments are providing riders with seamless user experiences, they are also essential in helping members of society such as the unbanked and underbanked participate in the digital economy by offering ways to convert cash into digital currency. A market analysis report concluded that global sales for digital ticketing reached a staggering 24.3 Billion USD in 2022. With an estimated 7.6% projected growth from 2023 to 2033, the market is expected to reach a value of over 53.7 Billion USD in the next ten years. This is evident as cities across the US are accelerating their efforts to adopt contactless payment systems in public transportation. In this article, we’ll examine how agencies can digitize cash in public transport by leveraging technological advancements to offer payment solutions to all users along with achieving other benefits such as increased operational efficiency, cost savings, and more sustainable networks.
What Is Cash Digitization In Transit And Why Does It Matter
In the past, public transport payments relied primarily on the use of physical tickets and tokens. Passengers would either buy individual tickets at stations or purchase pre-paid tokens onto their cards. These types of payment systems did come with a lot of limitations. For one, they were prone to errors and fraud, and secondly, the actual process of purchasing and validating tickets was usually time-consuming and inconvenient for both passengers and transit staff. With the advent of technology, payment systems in public transit have evolved significantly, yielding a variety of positive outcomes for riders and agencies. For instance, the introduction of smart cards and electronic ticketing systems has substantially improved the efficiency and convenience of how fares are purchased and handled. These cards allow passengers to preload funds, which are then automatically deducted during each journey. Not only does this speed up the process of boarding but it also reduces the need to handle cash, resulting in a more hygienic approach to fare collection, with additional cost-saving benefits and reduced chance of fraud. Public transport agencies are seeking ways to reduce cash handling onboard transit vehicles as cash fares are known to notoriously slow down boardings and are generally inefficient due to the workload they create. Transit staff has to collect, count, and convert cash, indicating just how big of an impact it has on agencies’ operations. Furthermore, purchasing and maintaining fare boxes and ticket machines creates additional spending for transport authorities. According to the “Cashless Cities” report by Visa, public transit authorities spend around 3.5 times more on the physical collection of fares when compared to deploying digital payment systems and solutions. By leveraging digital payments, agencies can save a lot of money since these payment systems offer the opportunity to shift sales from higher-priced retail channels, such as ticket vending machines or kiosks, reducing fare collection expenditures by up to 30%. Additionally, cash fares do not yield the same high-quality ridership data when it comes to reporting and service planning, meaning that they offer little to no value in aiding agencies to better understand how their services are being used or by who.
The question that remains, however, is how can agencies leverage the latest transit technology such as contactless payments, while continuing to serve customers who still want, or need to pay in cash in an increasingly connected and digital world. One of the solutions that has been proposed is converting cash into digital ‘mobility currency’ that allows riders to purchase tickets which can then be used through a smart card or mobile phone. Cash digitization refers to the ability to turn cash into a digital currency or digital credit. In the context of public transportation, cash digitization will enable the unbanked or underbanked to convert cash into transit tickets or digital mobility credit by using various transaction channels, such as automated ticket machines, ticket offices, or third-party retailers. As agencies look for more ways to reduce expensive cash transactions and the associated fare media, along with reducing costs on hardware, and administration, it’s imperative they also make sure no passengers get left behind. The rapid growth in digital payments serves as proof of just how attractive this option has become for modern consumers. Visa’s network has reported that it processed over one billion tap-to-ride transactions on global transit systems in 2022. Europe accounts for the largest share of those transactions, including over four million taps a day on Transport for London’s (TfL) system, while North America accounts for approximately one in five contactless taps onboard transit systems. Contactless payment technology has provided positive ROI for transit agencies, on top of giving customers the convenience and flexibility that they have always wanted. For instance, open-loop technology allows passengers to use their existing contactless bank cards to pay for transit journeys even if they are not affiliated with the transit network. An open-loop payment system supports transactions across various networks, allowing for a broader merchant acceptance. Unlike closed-loop systems, open-loop payments are not limited to a specific retailer or service provider network. They can facilitate the use of debit or credit cards issued by various financial institutions and are valid within accepted card networks, such as Visa or MasterCard. Through this, transit authorities can now offer riders a seamless user experience (UX) on top of the best fare benefits through fare capping, making public transport more accessible, efficient, sustainable, and convenient.
Reducing Reliance On Cash In Transit Through Contactless EMV Payments
Contactless payment technology was initially introduced in the United States around the early 2000s, although its widespread adoption began somewhere in 2014. Mobile payment services such as Apple Pay highlighted a pivotal moment in driving this shift, as they brought significant attention to contactless payments, through their deployment of near-field communication (NFC) technology which was used to facilitate payments with a simple tap on a smartphone. Other major platforms which included Google Pay and Samsung Pay, followed soon after, further driving the adoption of these solutions. Contactless technology has aided businesses of all sizes to adapt to the digital economy, with innovations such as Tap on Phone paving the way, essentially turning a customer’s smartphone into a digital cash register. Contactless payments are a simple, fast, and secure solution that allows people to pay for goods and services touch-free, using a payment card, mobile wallet, or payment-enabled wearable, like a smartwatch or fitness tracker. Users only need to tap or hold their card or device on the merchant’s payments reader to complete a transaction. In the context of public transportation, the adoption of digital payments has brought many benefits to public transport companies. Firstly, by eliminating the need to handle cash in transit, agencies can promote a more secure environment for payments. Switching to digital payments reduces the risk of theft, and accounting errors, saving time that would otherwise be wasted on manual transactions. Secondly, digital payments offer a more efficient way of purchasing fares, one that is more convenient for passengers. With mobile payment options, passengers can purchase tickets almost seamlessly, avoiding long queues at transit stations. Streamlining the process of fare collection also means that passengers are less likely to miss rides due to long wait times, which is one of their main frustrations when using public transit. Thirdly, digital payments provide a wealth of valuable data that transport authorities can analyze to improve decision-making in day-to-day operations. By tracking transactional data, agencies can gain insights into passengers’ behavior, peak times, and popular routes. This data can be leveraged to optimize operations, improve service delivery, and help transport companies make better decisions regarding staff deployment and vehicle scheduling.
With contactless payment methods, such as Near Field Communication (NFC) and Radio Frequency Identification (RFID), consumers can make payments by simply tapping or waving their cards or smartphones near the payment terminals. Open-loop technology holds the potential to dramatically enhance and streamline fare collection for transport agencies since it enables transit payments across all networks. Contactless payment systems are designed following international EMV® standards so they are a universal solution that passengers can use as long as they own a bank-issued contactless EMV® credit/debit card. Their compatibility with a wide range of smart devices makes them an appealing choice for riders since they can purchase fares wherever open-loop payment systems are present. This technology offers a faster, more convenient, and hygienic payment experience, which is particularly important in a world where minimizing physical contact has been crucial since COVID-19. Statistics from 2023 show that contactless payments accounted for more than two in every three in-person transactions on Mastercard’s network, which is an increase from one in three before the pandemic. It’s also reported that as of 2024, nearly 90% of U.S. consumers use contactless payments frequently, with the market projected to increase at a 19.1% CAGR until 2030. The widespread availability of prepaid EMV® cards is another important step in digitizing cash in transit and promoting inclusivity as agencies can leverage this solution to expand their customer base and cater to the needs of unbanked/underbanked passengers. This ensures that any rider who wishes not to carry cash and doesn’t rely on traditional banking services can still benefit from open-loop card payments. Prepaid open-loop cards alleviate the concerns of unbanked and underbanked members of society by providing easy access to transport services. This is also a viable alternative to closed-loop smart cards for parents or guardians of young people who can use prepaid open-loop cards on a shared family account. Looking ahead, the contactless payment market in the United States is set to grow even further as technology advances and more people embrace this form of payment. Current projections show that by 2026, contactless payments will likely account for over 40% of all card transactions in the nation. The integration of contactless payments with emerging technologies such as wearable devices and the Internet of Things (IoT) is further thought to contribute to the appeal and convenience of these solutions. Furthermore, the ongoing improvements in payment security, such as tokenization and biometric authentication, are also having a significant impact on driving user adoption along with consumer confidence.
The Role Of Digital Wallets & Mobile Ticketing In Enabling Cash-free Transit Experiences
Near Field Communication (NFC) technology plays a pivotal role in the widespread use and adoption of contactless payments. Near Field Communication (NFC) or Radio Frequency Identification (RFID) technology makes it possible for devices, such as smartphones and cards, to communicate with payment terminals when they are in close proximity. This wireless communication protocol has served as the foundation of many contactless payment solutions. NFC has not only facilitated contactless payments but also holds a central role in enabling new consumer experiences like ticketing, mobile loyalty programs, and public transportation payments. This has resulted in a significant reduction in the use of physical cash in favor of digital wallets. In transportation, contactless payments can occur through digital wallets on smartphones, wearable devices, or contactless-enabled credit and debit cards. Typical examples of contactless payments in transit include mobile payment platforms such as Apple Pay, Google Pay, and tap-to-pay credit cards. Digital wallets and contactless payments usually go hand-in-hand, as digital wallets enable contactless transactions. Users of these platforms download a digital wallet app and add their payment information, such as a credit or debit card, essentially storing them in the app. When adding a specific card, a digital wallet creates a unique token that represents the card’s details, ensuring all transactions are secure and protected. At checkout, users can tap their phones, smartwatches, or bank cards on a contactless-enabled terminal. The terminal then reads the token, and the transaction is seamlessly completed within seconds, without any need for physical contact. Digital wallets act as the cornerstone of the digital money ecosystem. These solutions are the primary interface where users interact with and manage their digital currencies. Digital wallets often incorporate encryption techniques, multi-factor authentication, and biometric authentication methods to safeguard users’ digital assets. According to Visa, digital wallets are the fastest-growing online payment method globally and have become a preferred method of payment for people when it comes to a variety of services including transit fares.
A survey conducted by ABI Research on behalf of the NFC Forum found that more than 80% of the respondents said they prefer to make contactless payments through their smartphone or smartwatch. Participants in the survey also stated that they would prefer to use their smartphone or smartwatch to make a payment rather than their bank-issued card. What this tells us is that riders now carry in their pockets one of the biggest tools available on the market that allows them to digitize the majority of payment-related interactions, specifically when it comes to how they purchase fares. Since the majority of smartphone users prefer to pay with a mobile payment app, such as Apple Pay, Google Pay, or Samsung Pay, there is no longer a need to carry cash or a physical card. With Mobile Ticketing riders can select, pay for, and validate their fares on public transport using only their smartphone. The only thing they need is to download and install a mobile ticketing app on their smartphone. Some mobile applications include features such as trip planning tools with real-time updates on the arrival and departure of transit vehicles, along with any relevant info on the purchasing and validation of fares. To buy fares, riders need to create (or sync) an account and include their credentials such as email, and name, along with their preferred method of payment such as credit or debit card. Fares are then stored in an in-app wallet and can be used for validations across a public transit network via several methods like scanning or visual inspection. Among the main reasons why this method of paying for fares has risen so much in popularity is its improved convenience, ease of use, and security. If Mobile Ticketing is integrated with Account-based Ticketing, users can benefit from having their fares stored safely in their accounts. Riders don’t have to worry about losing their travel funds if they happen to misplace their phone as they can simply reinstall the app on another device. Mobile tickets are also incredibly easy to use as passengers only have to scan the QR code of the ticket at the validator or show an active ticket to an inspector. The widespread adoption of Mobile Ticketing Apps has also made it possible for transit agencies to implement Account-based Fare Collection, experiment with various types of fares, and introduce many useful functionalities. Data from mobile applications has been indispensable in allowing agencies to better monitor operational processes along with gathering valuable reports that can be leveraged for system optimization.
Why Account-based Ticketing Is Among The Best Solutions To Help Agencies Digitize Cash In Public Transit
Account-based Fare Collection Systems are by no means the sole solution in how we digitize cash transactions in transit but they are an important step in helping equip agencies with the tools they need to move away from older, outdated systems. Additionally, the evolving needs of riders have set new standards in place and public transport companies need to expand in order to cater to these expectations. This doesn’t necessarily imply that agencies need to invest heavily in a lot of technology but rather they should be diligent and intentional with the solutions they introduce. It means having a robust strategy in place regarding how solutions are implemented and scaling gradually, based on results. While removing cash completely from transit would be ideal when it comes to cost-savings and enhanced convenience, the reality is that this is not a feasible option for many transport companies or the communities they serve. With Account-based Fare Collection, we can initiate a shift toward digitizing fare payments while also giving options to agencies who are not yet ready to advance to cashless fare collection. Modern Account-based Ticketing (ABT) gives agencies a full stack of tools that can be customized to their unique and individual needs, helping them remove entirely or minimize the use of cash on board public transit vehicles. AFC systems provide agencies with a straightforward process for the purchase and validation of fare media. The best part about AFC systems is that they can be used by agencies of all sizes regardless of their geographical location or capacity. The majority of AFC solutions can also be installed alongside existing fare collection systems (by recycling compatible equipment) or the provider can supply the required equipment if needed. A more integrated approach to ticketing systems in transit could contribute to solving multiple problems in the sector, providing much-needed relief for overburdened metropolises by facilitating faster, safer, and more convenient rider experiences. With ABT, riders can create their accounts through a dedicated mobile app or web-based app issued by the service provider. Passengers can then top up the amount stored in their account using a variety of options, with the main focus being the mobile application as the purchasing of fares and validation become practically seamless. Payments can be facilitated either using cash (at a service window or a 3rd party partner), via a mobile application, or through a digital wallet and a credit/debit card. AFC solutions allow riders to still have the option to purchase and validate fares through the use of custom-designed smart cards that can be connected to the rider’s account and paper tickets bought at an MTS ticket window.
Transport companies are also investing in platforms that accommodate the needs of passengers who prefer, or have to, use cash and have a smartphone or a smart card at their disposal. Riders can now visit a ticket vending machine, convenience store, or ticket office and deposit cash in exchange for mobility credit (or virtual tickets) that is essentially stored in their accounts. By providing local retail stores with the ability to add funds or exchange cash for tickets, agencies can quickly and easily expand their riders’ options for using cash to travel. This form of cash digitization keeps the purchasing of fares off transit vehicles, aiding in speeding up services and delivering a more convenient experience for passengers who want to add funds to their accounts in person, while they do their weekly shopping, for instance. The Greater Dayton Regional Transit Authority (RTA) is a great example of a transport company that partnered with a mobility provider to expand its account-based ticketing system, allowing riders to purchase reusable smart cards for better convenience and more affordable travel. Dayton’s public transit passengers now have the option of purchasing smart cards from automated Ticket Vending Machines, allowing them to add funds to their accounts using cash or credit and debit cards. Enabling cash digitization within public transit makes it possible for riders to plan, track, and pay for their journeys in the way that best suits them. Fare collection should be intuitive and accessible for all riders, which is why we need to provide passengers with options to digitize cash such as loading funds into transit apps or at local retail outlets as a natural next step. The Vendstar® ticket vending machine (TVM) is another example of how riders can turn cash into digital mobility credit by purchasing or adding value to any smart fare media of their choice. They can also do this at an unmanned kiosk which is open 24/7. The durable and secure TVM accepts and validates cash and coins, along with the possibility of payment with credit and debit cards. It can be configured to issue and reload fare media along with manage transfers, as well as add value to a rider’s account which is associated with an agency’s transit app or a rider’s mobile wallet. When it comes to transit cards, although they are a closed-loop scheme, they are still relatively popular among transport operators as they enable a way to digitize money, turning it into digital mobility credit. Some transport companies are shifting their priorities towards incorporating open-loop payments, such as Dutch Public Transport which are now accepting bank cards or London TFL. Other countries have their own dedicated transit cards that mimic technology found in contactless payment systems. For instance, Hong Kong has its Octopus card, New York has the MetroCard, and Bishkek has Tulpar. Cards such as these can be reloaded with credit and used to pay for multiple types of transportation anywhere in a city.
How Advances In Digital Payments Can Help Overcome Challenges For Underbanked & Unbanked Individuals
Open-loop fare collection has been successfully implemented in various major cities around the globe and is considered to be the future of transit payments. While open-loop contactless payment technology can solve many problems in mass transit, there are still some concerns regarding how to make these solutions available to all members of society. Data published by the World Bank estimates that around 1.4 billion people worldwide remain unbanked. In the US, nearly 96% of households were reported to be banked in 2023, according to a national survey by the Federal Deposit Insurance Corporation (FDIC). The 2023 FDIC National Survey of Unbanked and Underbanked Households concluded that approximately 4.2% of U.S. households (representing 5.6 million households) did not have a bank or credit account. This implies that while the majority of Americans do own a bank account, a sizable percentage of US residents might get left behind when digital fare solutions become the norm and are prioritized in the name of increased convenience. Digital financial inclusion is imperative for reducing inequality in society, along with boosting economic growth. The APT reports that an estimated 87% of transit trips contribute directly to the local economy, resulting in numerous financial benefits for society. It’s further estimated that around 8% of the population of the United States depends on public transportation for their basic daily needs. That’s around 28 million Americans who rely on buses, trains, ferries, and streetcars to get where they need to go because they have no other option. Many argue that no public transport network should restrict its physical ticket offerings to the point of denying passengers their fundamental right to travel. To ensure inclusivity and accessibility in public transportation, agencies will need to carefully consider their options and address the needs of passengers without bank accounts and those who rely primarily on cash. Closed-loop systems allow passengers to purchase dedicated smart cards and load funds into them at specific places such as retail stores or ticket vending machines. This way they can pay for their rides even if they have no credit card or a bank account. While some Open-loop systems accept mobile wallets with cash-loading options, this would only apply to passengers who have or can use NFC-enabled smartphones. Unbanked individuals could be barred from using public transport services if the system is exclusively reliant on bank-issued cards or mobile phone apps connected to bank accounts.
To ensure future transit systems cater to the needs of the unbanked, transport authorities must incorporate an additional Closed-loop system that supports options such as rechargeable travel smart cards (or White-label EMV Cards for EMV Open-loop systems). Prepaid cards are a viable solution for expanding financial inclusion in transit since they provide a convenient and secure alternative to cash for riders to purchase fares and access transit services. The widespread use of smartphones presents another opportunity for agencies to leverage mobile ticketing to serve unbanked passengers. There are now mobile payment options that can imitate credit/debit cards, replacing the need for conventional travel cards. This provides a viable alternative for unbanked passengers to use payment services without having to own a bank account. For those without access to banking, mobile wallets with cash-loading capabilities could facilitate their participation in digital payment ecosystems. Digital payment solutions such as digital prepaid cards from Blackhawk Network (BHN) address many of the barriers found in traditional banking methods by giving underbanked and unbanked populations access to essential financial services. These solutions will be critical in the future when it comes to allowing people to participate in the digital economy and ensuring they have consistent access to a variety of public services needed to sustain a quality of life. Smartphones have evolved to become an essential part of people’s daily lives, with their application extending far beyond just basic communication. In 2024, it was reported that there are approximately 308 million smartphone users in the United States, a figure that’s expected to grow to over 324 million by 2029, according to Statista. This indicates that the majority of users in the US can leverage digital payment solutions, whether digital wallets or online banking, which are easily accessible on any mobile device. Other alternatives such as BHN’s Mastercard® and Visa® prepaid cards will offer customers a way to manage payments without the need for a bank account. This form of payment can be used anywhere Mastercard and Visa debit cards are accepted, including public transport facilities. It will be up to transport authorities to initiate the right partnerships with financial institutions and invest in the right solutions along with anticipating the current and future needs of all groups of passengers onboard public transit networks.
Final Thoughts
The use of digital wallets in the U.S. is set to increase dramatically in the next year, accounting for over half of the e-commerce transactions in the nation. By 2027, we can expect contactless payment transactions to amount to over $10 trillion on a global scale, rising from $4.6 trillion in 2022. With this in mind, we are sure to see public transport agencies accelerate their investment in the contactless payments ecosystem, as they attempt to cater to consumer demand and preference for seamless payments and user experiences. It’s also important to highlight that while improved rider experiences are a high priority for agencies, there are other substantial benefits to the advent of digital payments that should not be overlooked. The widespread adoption of digital payments in combination with ABT systems holds the potential to yield tremendous benefits for passengers, transport authorities, and cities. Through these technologies, agencies can delve into a wealth of data that can be used in numerous ways including service enhancements, allowing them to truly understand the needs of the communities they serve as well as how these solutions and technologies are impacting them over time. The digital transformation of public transport opens a new realm of possibility for better, more connected, and integrated transport services as well as new partnerships with mobility players from the private sector. Many anticipate that public transport will become an attractive alternative to private vehicles in the future as more people gradually start choosing it over their cars. Contact payment will likely also continue to be an integral part of public transportation. As we mentioned earlier, transit agencies will have to be diligent in their approach to fare collection, ensuring they have options for all passengers and that no one gets left behind, regardless of what technology comes around. New technologies such as smart wearables, biometric authentication, and voice-activated payments will continue to emerge and change the payment landscape over the next decade, and the majority of native apps will have basic banking features. Ultimately, the widespread adoption of contactless payments will drive innovation in multiple sectors including financial security, digital identity verification, artificial intelligence, and urban planning. As cities become smarter, we can expect to see various developments in the mobility sector, shaping a future where transport networks are safer, more connected, and sustainable, benefiting both people and the planet.
