Considering the Unbanked in Cashless Fare Payment at Point of Service for Bus/Demand-Response Services (2022)

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7   This chapter is organized into five sections. The first section reviews other studies from the TCRP, which is the preeminent source of fare policy and technology literature in North America. Next, literature pertaining to the unbanked is reviewed, including a small number of prior papers about the unbanked in public transit systems. Third, references about policy and regula- tory considerations are briefly summarized, including Title VI of the Civil Rights Act and other relevant state/local laws. The fourth section briefly summarizes international examples of cash- less fare systems. Finally, a summary of all this literature is presented. Part 1: Relevant TCRP Reports Over the last 25 years, numerous TCRP studies have explored fare system policies and tech- nologies; this section summarizes relevant research. The TCRP studies most relevant to this synthesis are shown chronologically in the “List of Most Relevant TCRP Studies on Fare Tech- nology or Policy” text box and briefly summarized in the following paragraphs. The first four (TCRP Report 10, TCRP Synthesis 26, TCRP Report 80, and TCRP Report 94) provide important background information about transit fare policies and fare collection pro- cedures. TCRP Report 10: Fare Policies, Structures, and Technologies reviewed fare policy, fare structure, and fare technology options used by transit agencies (Fleishman et al. 1996). TCRP Synthesis 26: Bus Transit Fare Collection Practices focused specifically on buses, including topics such as estimating fare evasion and training bus operators for fare collection (Stern 1997). TCRP Report 80: A Toolkit for Self-Service, Barrier-Free Fare Collection was directed at transit agencies considering proof-of-payment fare systems, particularly on rail and bus rapid transit (BRT) services; the authors noted that self-service barrier-free fare collection is generally not used by transit operators providing regular bus service in the United States (Multisystems, Inc. et al. 2002). TCRP Report 94: Fare Policies, Structures and Technologies: Update provides an update to TCRP Report 10 (Multisystems, Inc. et al. 2003). In TCRP Report 94, the key parameters of a fare system are discussed in detail, and their interrelationships are identified. These three key parameters, which were initially identified in TCRP Report 10, can be summarized as follows: 1. Fare Policy: The fare policy is said to establish principles and goals underlying and guiding a transit agency’s pricing-related decisions. 2. Fare Structure: This is divided into three components: a. Fare Strategy: This includes the general approach for the base fare (e.g., flat fare versus differentiated fare) and the transfer policy. C H A P T E R 2 Literature Review

8 Considering the Unbanked in Cashless Fare Payment at Point of Service for Bus/Demand-Response Services b. Payment Options: These are the different forms of payment, such as period passes or multiride tickets. It should be noted that payment options are also commonly referred to as “fare products.” c. Pricing Levels: These are the actual prices transit riders pay. 3. Technology: This can include various elements, such as: a. Fare Media: This is the instrument used for payment, including cash, tokens, magnetic- stripe cards, paper tickets, smart cards, and credit/debit cards. b. Type of Fare Collection: This refers to how fares are validated or inspected (e.g., barriers, conductors, self-service/proof-of-payment, and pay-on-boarding). The technology components discussed in TCRP Report 94 are particularly relevant to this synthesis. For example, the type of fare collection often aligns closely with the mode of transit. As shown in Table 1, buses usually have pay-on-boarding systems (i.e., fareboxes) and some have proof-of-payment systems (i.e., ticket vending machines and/or validators). Barrier-based systems involving prepayment are more typical for rail (both light and heavy) and bus rapid transit. List of Most Relevant TCRP Studies on Fare Technology or Policy • 1996 TCRP Report 10: Fare Policies, Structures, and Technologies • 1997 TCRP Synthesis 26: Bus Transit Fare Collection Practices • 2002 TCRP Report 80: A Toolkit for Self-Service, Barrier-Free Fare Collection • 2003 TCRP Report 94: Fare Policies, Structures and Technologies: Update • 2015 TCRP Report 177: Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transportation • 2017 TCRP Synthesis 125: Multiagency Electronic Fare Payment Systems • 2020 TCRP Synthesis 144: Multimodal Fare Payment Integration TCRP Synthesis 148: Business Models for Mobile Fare Apps • Ongoing TCRP Project J-11/Task 39, “Evaluation Framework for Fare-Free Public Transportation” TCRP Synthesis 160: Fare Capping: Balancing Revenue and Equity Impacts Approach Light Rail Heavy Rail Commuter Rail Bus Rapid Transit Bus Proof of Payment X X X X X Barrier X X X Pay on Boarding X X X Conductor-Validated X Source: Adapted from TCRP Report 94 (Multisystems, Inc. et al. 2003), page 23. Table 1. Use of fare collection approaches by mode.

Literature Review 9   It should also be noted that the fare media (or payment instruments) discussed in TCRP Report 94 have evolved rapidly over the last decade. New payment instruments—such as smartphones—have become commonplace, and the back-office systems used to support these newer forms of fare media have also changed. The next four publications in the “List of Most Relevant TCRP Studies on Fare Technology or Policy” text box (TCRP Report 177, TCRP Synthesis 125, TCRP Synthesis 144, and TCRP Synthesis 148) provide a more up-to-date look at fare payment technology. TCRP Report 177: Preliminary Strategic Analysis of Next Generation Fare Payment Systems for Public Transporta- tion included a detailed summary of new and emerging technologies that are being used in fare systems (Wallischeck et al. 2015). The authors presented a framework for fare payment design at the system level and identified four key design attributes: (1) single- versus multitransit agency operating environment; (2) proprietary fare payment systems versus standards-based systems complying with data and technology specifications used by the payments industry; (3) closed- loop versus open-loop payment systems; and (4) card- versus account-based systems. The last attribute is particularly relevant to this report, and more details are provided in the following text box. Card-based system: The traditional fare collection architecture, in which the transit card serves solely as the fare medium. Value is carried on the card and decreases as the rider is granted access to the transit system. Account-based system: The fare medium associates the transit rider with infor- mation held in a separate account. Value is not carried on the fare medium; it is saved in the account. Fare processing is typically performed in the transit system’s back office (Wallischeck et al. 2015). A mobile fare payment app (or mobile ticketing app) is a software application on a smartphone or similar electronic device that allows transit riders to pay for and access public transit services. Mobile fare payment apps are typically downloaded from Google Play for Android devices or the Apple App Store for iOS devices (Brakewood 2020). TCRP Synthesis 125: Multiagency Electronic Fare Payment Systems (Okunieff 2017) and TCRP Synthesis 144: Multimodal Fare Payment Integration (Kok and Lipták 2020) provided additional background on recent fare technology advancements, many of which help to increase adoption of fare payment technologies that facilitate prepayment. TCRP Synthesis 148: Business Models for Mobile Fare Apps identified different business models for mobile fare applications, which are also referred to as mobile ticketing apps (Brakewood 2020). Mobile fare apps on smartphones are an increasingly commonplace technology that facilitates prepayment of transit fares. Last, it is important to recognize two TCRP projects that are ongoing at time of writing: TCRP Project J-11/Task 39, “Evaluation Framework for Fare-Free Public Transportation,” and TCRP Synthesis 160: Fare Capping: Balancing Revenue and Equity Impacts (Pettine et al. 2022). The first is exploring the merits of providing transit service without charging fares and

10 Considering the Unbanked in Cashless Fare Payment at Point of Service for Bus/Demand-Response Services identifying strategies for replacing passenger fare revenues. As noted in Chapter 1, many transit agencies temporarily stopped collecting fares due to the COVID-19 pandemic, and some are considering permanent free fare policies. The second ongoing project pertains to fare capping, which is an increasingly common policy in which the transit agency caps the maximum cost to a rider in a given time period. To the best of the author’s knowledge, no existing TCRP reports dis- cuss fully cashless bus systems that require prepayment of fares, which necessitates this synthesis. Part 2: Unbanked Populations As was briefly discussed in Chapter 1, removing cash collection from transit vehicles— particularly buses—and requiring prepayment of fares has the potential to decrease operat- ing costs, reduce dwell times and vehicle running times, and improve safety and security. But cashless prepayment practices could pose challenges to riders who do not have access to finan- cial instruments such as credit/debit cards, and may be particularly difficult for those who are unbanked. In light of this issue, this section provides a brief review of references pertaining to the unbanked, divided into two parts: the first focuses on nationwide trends for the unbanked, and the second specifically on unbanked transit riders. Nationwide Trends for the Unbanked In the United States, the primary source of nationwide research on banked and unbanked populations is the Federal Deposit Insurance Corporation (FDIC). The FDIC’s overarching mission is to “maintain public confidence in the banking system” (FDIC 2021). As part of this goal, the FDIC is “committed to expanding economic inclusion in the financial mainstream by ensuring that all Americans have access to affordable and sustainable products and services from insured deposi- tory institutions” (FDIC 2019a). The FDIC’s 2019 Economic Inclusion Strategic Plan sets forth five key opportunities to increase economic inclusion in the United States, as shown in Table 2. Fare capping: The transit agency caps the maximum cost to a rider in a given time period. For daily capping, riders never pay more than the total cost of a day pass. Economic Inclusion Opportunity Area Description Support Financial Education and Capability Develop and promote free, high-quality financial education to strengthen consumer financial capability and sustainable banking relationships. Promote Affordable Insured Transaction and Savings Accounts Promote availability, access, and use of affordable insured transaction and savings accounts. Increase Consumer Access to Sustainable Credit Increase consu mer access to credit through resources that help build and sustain a strong credit history. Encourage Responsible Options for Affordable Mortgage Credit Encourage responsible affordable mortgage lending by banks and their partners. Strengthen Access to Financial Services for Small Businesses Encourage financial institutions and their partners to prudently serve the financial needs of emerging entrepreneurs and small businesses. Source: Adapted from FDIC 2019a. Table 2. The FDIC’s economic inclusion opportunity areas. Economic inclusion: All consumers have access to safe, affordable financial products and services. Ownership of a transaction account is a first step toward economic inclusion (FDIC 2021).

Literature Review 11   To further promote economic inclusion, the FDIC works to fill a gap in research and data regarding household participation in the banking system and use of nonbank financial services, particularly through “How America Banks: Household Use of Banking and Financial Services.” This research effort presents results from the 2019 household survey on the use of banking and financial services—this survey has been conducted biennially since 2009 and is done in partner- ship with the United States Census Bureau. The 2019 survey included responses from nearly 33,000 households nationwide (Kutzbach et al. 2019). One of the key findings of the survey was that an estimated 5.4% of US households were unbanked in 2019, with no one in the household owning a checking or savings account at a bank or credit union. This was the lowest percentage of unbanked households since the FDIC began conducting the survey in 2009, as shown in Figure 2. Another key finding was that there was considerable variation in banked and unbanked rates by geographic region. Unbanked rates were highest in the South at 6.2%, compared with 5.0% in the Midwest, 4.9% in the West, and 4.7% in the Northeast. Geographic differences can be further explored with an interactive tool on the FDIC’s website (https://www.economicinclusion.gov/) that allows users to create custom data tables and charts by region, state, or metropolitan statisti- cal area (MSA), which has been done for each of the case examples in Chapter 3 of this report. The 2019 FDIC survey further found that unbanked rates vary considerably by demographic. As shown in Table 3, unbanked rates were higher among lower-income households, less edu- cated households, Black households, Hispanic households, American Indian or Alaska Native households, working-age disabled households, and households with volatile incomes. As also shown in Table 3, however, most of these groups have experienced declines in unbanked numbers over the past 4 years. The differences in unbanked rates by demographic are particularly relevant to transit agen- cies, which have a diverse ridership that may differ demographically from the population as a whole. It is important therefore to conduct research on the unbanked specifically for the transit- riding population, which is discussed in the next section. Unbanked Transit Riders To the best of the author’s knowledge, only three studies have focused specifically on unbanked transit riders in the United States; these are summarized here. Source: Adapted from Kutzbach et al. 2019. 7.6% 8.2% 7.7% 7.0% 6.5% 5.4% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 2009 2011 2013 2015 2017 2019 Figure 2. Nationwide estimate of the percentage of unbanked households by year.

12 Considering the Unbanked in Cashless Fare Payment at Point of Service for Bus/Demand-Response Services The first relevant reference is a white paper published by the Smart Card Alliance in 2008 that began with a summary of the unbanked market in the United States. As part of this sum- mary, the authors presented the results of a 2007 survey conducted by the Southwest Ohio Regional Transit Authority (SORTA), which operates Cincinnati’s Metro. The survey revealed that the majority of respondents (69%) had a checking account, 62% had debit cards, and only 49% had a credit card (n=430). Because the survey did not ask about savings accounts, the SORTA data could not be directly compared with the FDIC definition of unbanked. More- over, the survey data were not broken down by ethnicity or income level to allow for further demographic study. The second noteworthy reference is a journal paper that used systemwide ridership survey data from the Chicago Transit Authority (CTA) collected in 2008 (Brakewood and Kocur 2013). On the CTA survey, respondents were asked what financial instruments they used; the majority Characteristics 2015(Percent) 2017 (Percent) 2019 (Percent) Difference (2019–2017) All Family Income Less Than �15,000 �15,000 to �30,000 �30,000 to �50,000 �50,000 to �75,000 At Least �75,000 Education No High School Diploma High School Diploma Some College College Degree Age Group 15 to 24 Years 25 to 34 Years 35 to 44 Years 45 to 54 Years 55 to 64 Years 65 Years or More Race/Ethnicity Black Hispanic Asian American Indian or Alaska Native Native Hawaiian or Other Pacific Islander White Two or More Races Disability Status Disabled, Aged 25 to 64 Not Disabled, Aged 25 to 64 Monthly Income Volatility Income Was About the Same Each Month Income Varied Somewhat From Month to Month Income Varied a Lot From Month to Month 7.0 25.6 11.8 5.0 1.6 0.5 23.2 9.7 5.5 1.1 13.1 10.6 8.9 6.7 5.8 3.1 18.5 16.3 3.9 15.3 10.3 3.1 7.9 17.6 6.5 5.7 8.7 12.9 6.5 25.7 12.3 5.1 1.5 0.6 22.4 9.4 5.1 1.3 10.0 8.5 7.8 6.9 5.9 3.9 16.8 14.4 2.6 18.0 2.8 3.0 8.5 18.1 5.7 5.6 6.8 13.2 5.4 23.3 10.4 4.6 1.7 0.6 21.4 8.1 4.3 0.8 8.8 6.9 6.3 5.1 5.5 3.3 13.8 12.2 1.7 16.3 NA 2.5 4.9 16.2 4.5 4.9 6.4 10.7 -1.1* -2.5* -1.8* -0.5 0.3 0.0 -1.0 -1.4* -0.9* -0.5* -1.2 -1.6* -1.5* -1.8* -0.5 -0.6* -2.9* -2.2* -1.0 -1.7 NA -0.6* -3.5* -1.9 -1.1* -0.8* -0.4 -2.5 Source: Adapted from Kutzbach et al. 2019, page 13. Note: Asterisk indicates differences are statistically significant at the 10% level. NA indicates the sample size is too small. Table 3. Unbanked rates by household characteristics and year.

Literature Review 13   (68%) said they used a checking account, 64% used credit cards, and 55% used debit cards (see Table 4). Based on this question, CTA riders who had a checking account, checks, debit card, or credit card were considered banked; this included 1,900 (weighted) respondents, or 80% of CTA riders. The other 475, or 20%, were considered unbanked. The percentage of unbanked transit riders was significantly greater than the percentage of unbanked individuals from the nationwide FDIC study, which may be due in part to the CTA survey question, which did not include the option of a basic savings account (Brakewood and Kocur 2013). The demographics of banked versus unbanked CTA riders were further analyzed by the author in her master’s thesis, and the results are shown in Table 5. The author concluded that the survey results were generally in alignment with nationwide studies demonstrating that, for example, unbanked individuals often have lower levels of education and are more likely to be from minority racial groups (Brakewood 2010). In a 2019 study, a team of researchers led by Portland State University conducted transit rider intercept surveys at transit stations and bus stops in three regions: Denver, CO; Eugene, OR; and Gresham/Portland, OR. In total, 2,303 riders completed intercept surveys across the three regions. The survey focused on current fare payment behavior, access to banking, internet and smartphone resources, and potential fare payment behavior in the absence of cash options. As can be seen in Table 6, the authors estimated the percentage of unbanked riders in each region, which was 6% for Denver, 4% for Eugene, and 9% for Gresham/Portland. It is important to note, however, that these surveys were not conducted systemwide and therefore may not be representative of all riders (Golub et al. 2021). The authors of this study further broke down the survey results by income category (low, high, or missing) and by race/ethnicity (non-Hispanic whites, people of color, or missing), and the results can be seen in Table 7. The composite analysis of all three regions combined shows significantly lower access to banking and internet for low-income respondents. The differences by race are smaller and not statistically significant. In addition to this survey, the research team developed a cost-benefit framework to assess cashless fare collection strategies. Five scenarios were identified that had differing levels of cash acceptance throughout a transit system. A qualitative analysis framework was also developed using a scoring system to assess equity. Both the cost-benefit analysis framework and qualita- tive equity analysis framework are likely to be useful to transit agencies considering reducing or eliminating cash fare collection; they are described in more detail in the report from Golub et al. (2021). Financial Instrument Respondents (Weighted) Percent of Riders Checking Account Credit Card Checks Debit Card Currency Exchanges Other None No Answer 1,664 1,554 1,363 1,338 596 36 222 64 68% 64% 56% 55% 24% 1% 9% 3% Source: Adapted from Brakewood and Kocur 2013 using 2008 survey data. Table 4. CTA rider survey showing use of financial instruments.

14 Considering the Unbanked in Cashless Fare Payment at Point of Service for Bus/Demand-Response Services Characteristics Banked Unbanked All Riders Count (Weighted) % of Banked (Column) Count (Weighted) % of Unbanked (Column) Count (Weighted) % of All Riders (Column)Weighted Sample Size 2,439 All Respondents Gender Male Female Disabled Disabled None No Answer Age 16 to 17 years 18 to 24 years 25 to 34 years 35 to 44 years 45 to 54 years 55 to 64 years 65 and older No Answer Ethnicity White/Caucasian Black/African American American Indian/Alaskan Native Asian/Pacific Islander Other Hispanic Don't Know Refused Employment Status Employed Student Homemaker Retired Unemployed Other Don't Know No Answer Education Less than High School High School Diploma/GED Some College/Associate ’s Degree Bachelor’s Degree Post-Bachelor’s Degree No Answer 1,900 798 1,102 139 1,756 4 21 141 328 367 381 337 12 310 1,153 526 30 91 38 103 4 33 1,311 188 77 318 148 14 0 1 99 196 524 530 541 10 100% 42% 58% 7% 92% 0% 1% 7% 17% 19% 20% 18% 1% 16% 61% 28% 2% 5% 2% 5% 0% 2% 69% 10% 4% 17% 8% 1% 0% 0% 5% 10% 28% 28% 28% 1% 475 192 283 63 409 2 59 69 63 68 75 54 85 2 130 250 9 13 16 71 3 7 176 110 33 85 102 14 0 5 148 126 115 47 29 10 100% 40% 60% 13% 86% 0% 12% 15% 13% 14% 16% 11% 18% 0% 27% 53% 2% 3% 3% 15% 1% 2% 37% 23% 7% 18% 22% 3% 0% 1% 31% 27% 24% 10% 6% 2% 2,439 1,011 1,428 204 2,223 12 81 211 394 446 467 403 412 26 1,319 787 41 104 56 176 7 52 1,519 303 112 424 254 29 0 13 247 330 650 591 591 29 100% 41% 59% 8% 91% 0% 3% 9% 16% 18% 19% 17% 17% 1% 54% 32% 2% 4% 2% 7% 0% 2% 62% 12% 5% 17% 10% 1% 0% 1% 10% 14% 27% 24% 24% 1% Source: Adapted from Brakewood 2010, page 114. Table 5. CTA survey showing demographics of banked and unbanked riders (2008 data). Share (%) of riders lacking access: Denver Eugene Gresham/Portland Composite Sample Size ( n) Unbanked (No savings, checking, credit, debit accounts) Lacks Smartphone No Internet Only Wi -Fi for Internet 514 6 12 6 28 1240 4 19 8 38 549 9 14 6 28 7 13 6 29 Note: Bolded numbers show significant differences at the 0.05 level. Source: Adapted from Golub et al. 2021, page 32, using survey data from 2019. Table 6. Survey of unbanked riders in Denver, Eugene, and Gresham/Portland (2019 data).

Literature Review 15   Part 3: Policy and Regulatory Considerations in the United States As noted in the previous section, unbanked transit riders may be more likely to come from minority and/or low-income groups, which could lead to concerns about civil rights and dis- crimination. Federal, state, and local laws guide the process of ensuring transit system changes do not have a discriminatory impact on protected populations. This section presents a summary of two relevant legal and policy considerations. The first is federal policy about Title VI of the Civil Rights Act; the second is some state and local policies that ban or penalize businesses that do not accept cash, often citing discrimination against the unbanked or low-income. Federal Level In the context of public transit, the FTA provides guidance to fixed-route transit providers to ensure that “the impacts of service and fare changes are not discriminatory and are distributed equitably to minority and low-income populations.” Transit agencies with 50 or more fixed- route vehicles in peak service in large urbanized areas (population over 200,000) are instructed to develop written procedures “to evaluate, prior to implementation, any and all service changes that exceed the transit provider’s major service change threshold, as well as all fare changes, to determine whether those changes will have a discriminatory impact based on race, color, or national origin” (FTA 2018). These evaluations typically take the form of either a Title VI service equity analysis or a Title VI fare equity analysis, the latter of which may be necessary when a transit agency is considering implementing a cashless fare system. More detailed guidance can be found in FTA 2012 and FTA 2021. In addition to information provided directly by the FTA, two references on Title VI may be helpful to transit agencies planning for fare system changes. First, the National Transit Institute (NTI) regularly conducts an online training course, Title VI and Public Transit (NTI 2021). Second, the TCRP recently published the two-part TCRP Research Report 214: Equity Analysis in Regional Transportation Planning Processes. The first volume provides a guide for transportation profes sionals at metropolitan planning organizations and transit agencies, including information about methods, tools, and resources compliant with equity- related federal requirements (Twaddell and Zgoda 2020). Source: Adapted from Golub et al. 2021, pages 34 and 36. Notes: Bolded numbers show significant differences at the 0.05 level. “High” is income above 50k/year, “Low” below 50k/year, “Miss.” missing income. NHW = non-Hispanic whites, POC = People of Color, “Miss.” declined to answer. Share of riders (%) Denver Eugene Gresham/Portland Income level High Low Miss. High Low Miss. High Low Miss. Sample size (n) Unbanked ( no savings, checking, credit, debit account ) Lacks Smartphone No Internet Only Wi -Fi for Internet Race/Ethnicity POC Miss. NHW POC Miss. NHW POC Miss. Sample Size (n) Unbanked Lacks Smartphone No Internet Only Wi -Fi for Internet NHW 1 99 0 5 1 9 184 4 13 5 28 228 9 14 6 35 279 7 13 6 31 187 7 14 10 26 51 10 10 10 16 89 0 16 1 26 785 4 19 8 37 743 3 17 7 41 322 4 15 4 42 408 6 24 11 35 133 4 27 17 34 82 4 2 2 16 240 6 14 6 28 234 6 15 5 29 217 11 11 4 27 233 13 17 8 31 92 10 20 11 29 Table 7. Survey of unbanked riders broken down by income level (top) and race (bottom). TCRP Research Report 214: Equity Analysis in Regional Transportation Planning Processes, Volume 1: Guide includes information about methods, tools, and resources compliant with equity-related federal requirements (Twaddell and Zgoda 2020).

16 Considering the Unbanked in Cashless Fare Payment at Point of Service for Bus/Demand-Response Services State and Local Levels In addition to federal policies, transit agencies considering cashless fare systems should inves- tigate state and local policies that may be applicable. One relevant type of state and/or local policy is bans or penalties on businesses (e.g., retail stores and restaurants) that do not accept cash, which can be considered discrimination against the unbanked or low-income (Golub et al. 2021). For example, in 2019, New Jersey enacted a law that banned most brick-and-mortar busi- nesses from refusing cash (Friedman 2019). Massachusetts has a similar law stating that “no retail establishment offering goods and services for sale shall discriminate against a cash buyer. . . . All such retail establishments must accept legal tender when offered as payment by the buyer” (MA General Laws Part III, Title IV, Chapter 225D, Section 10A, 2016, https://malegislature. gov/laws/generallaws/partiii/titleiv/chapter255d/section10a). At the local level, similar policies that ban or penalize businesses if they do not accept cash have been enacted in San Francisco, CA (Renda 2019), Philadelphia, PA (Goodin-Smith 2019), and New York City (Shanahan and Mays 2020). These laws vary by state and locality, and in many cases it is unclear if they would apply to transit vehicles, since cash is accepted elsewhere on the transit system. Transit agencies considering cashless fare systems should be aware of this trend in the broader business com- munity and conduct their own legal research on the topic. Part 4: International Examples of Cashless Fare Collection Systems Although the bulk of this synthesis focuses on transit operators in the United States, this sec- tion summarizes international examples. Transit operators in many countries and contexts have implemented cashless fare systems for various reasons. In her recent master’s thesis, Lily T. Ko presented a summary of international examples, including transit operators that implemented cashless fare collection temporarily and others that did so permanently. Examples in Africa include Nairobi, Kenya, and Kigali, Rwanda. The transit providers in both cities implemented cashless fare systems with the key goal of reducing corruption. The results were quite different, however: Nairobi’s minibus (matatu) operators revolted against the cashless system and reverted to cash payments, whereas cashless fare collection was more posi- tively received in Kigali and has been gradually expanded to most of the bus system. Numerous examples of cashless fare collection can also be found in Europe. Stockholm’s Storstockholms Lokaltrafik and Amsterdam’s Gemeente Vervoerbedrijf have implemented cash-free policies on buses with a primary goal of improving safety and security. Perhaps the most prominent European example of cash-free buses is Transport for London (Ko 2019). Given readily available information in English about London, this is described in more detail in the next paragraph. In 2014, Transport for London (TfL) introduced a systemwide cash-free policy on buses. At the time this policy was introduced, cash fares made up less than 1% of all trips on London buses. One of the primary motivations for going cash-free was the large drop in the number of pas- sengers paying cash on buses; 10 years earlier, approximately 25% of trips were paid for in cash, but that had fallen to approximately 0.7% by 2014. Bus customers could pay using a contactless Oyster card, a prepaid ticket or concessionary ticket (such as for older and disabled people), or a contactless payment card (such as a contactless Visa or MasterCard). TfL introduced numerous initiatives and policies to help smooth the transition to cash-free buses. Notably, a “one more journey” policy was instituted approximately 1 month beforehand; this let customers make one more trip on the network even if they did not have sufficient funds loaded on their Oyster card. TfL also provided guidelines on vulnerable passengers to all London bus drivers and conducted a review of its vast retail sales network where customers could get/reload Oyster cards, which are referred to as Oyster ticket stops (TfL 2014). It should also be noted that TfL conducted extensive outreach and customer research before implementing cash-free buses, which included

Literature Review 17   a “consultation report” with over 37,000 responses (Ko 2019). London buses remain cash-free to this day (TfL 2021). Another international example of cash-free fare collection is the bus services managed by Transport for New South Wales (TfNSW) in Sydney, Australia. Over the past two decades, a “prepay” policy has been gradually introduced on Sydney buses. The term “prepay” indicated passengers could not purchase a ticket from bus operators and instead had to purchase fares before boarding. This was introduced in the mid-2000s at select bus stops and gradually expanded to numerous entire bus routes; at the time, the predominant form of fare payment was magnetic- stripe tickets (Sydney Buses 2005). Between 2012 and 2016, the Opal contactless smart card system was rolled out (Munro 2012; TfNSW 2016). Opal has become the primary means of payment on prepay routes, and many routes have been converted over the past few years to “Opal only,” where only Opal cards or contactless payments are accepted (TfNSW 2021). Part 5: Summary of Literature Review The following is a summary of this literature review. • Over the last 25 years, the TCRP has published numerous relevant studies on transit fare policy and payment technologies. These studies provide important background information on terminology and industry trends. • Removing cash fare collection from transit vehicles could pose challenges to riders who are unbanked, i.e., who don’t have a checking or savings account. • In the United States, the primary source of research on banked and unbanked populations is the FDIC. The results of the FDIC’s biennial nationwide survey estimated that 5.4% of US households were unbanked in 2019, which was the lowest since the FDIC began the survey in 2009. • The 2019 FDIC survey further found that unbanked rates vary considerably by demographic. Unbanked rates were higher among lower-income households, less-educated households, Black households, Hispanic households, American Indian or Alaska Native households, working-age disabled households, and households with volatile incomes. • Only a small number of studies have specifically investigated unbanked transit riders in the United States. The most recent of these was led by a research team at Portland State Univer- sity, who surveyed transit riders in Oregon and Colorado to gauge access to financial instru- ments and cash use. The research team also developed a cost-benefit framework to assess cashless fare collection strategies and a qualitative analysis framework to assess equity. • An important policy and regulatory consideration for transit fare system changes is Title VI of the Civil Rights Act of 1964. Transit systems considering cashless fare collection may need to conduct a Title VI fare equity analysis. Title VI analyses are discussed in detail for specific case examples in the next chapter. • At the state/local level, some jurisdictions have recently enacted bans or penalties on busi- nesses that do not accept cash, often citing discrimination against unbanked or low-income populations. It is unclear if they would apply to transit vehicles, since cash is accepted else- where on the transit system. Transit agencies considering cashless fare systems should be aware of this trend in the broader business community and conduct their own legal research on this topic. • Outside of the United States, there are many prominent examples of cashless fare systems, such as Transport for London. These international examples are from countries with many different rules and regulatory considerations, however. This research and literature review sets the stage for this synthesis’s investigation of cashless fare systems in the United States, which is done in the next chapter using specific case examples.