This week on the Talking Headways podcast we’re joined by Gillian Gillett of Cal ITP and Dan Baker of the Connecticut Department of Transportation to discuss how agencies can create simpler payment and travel experiences for transit riders. We chat about the Connecticut Integrated Mobility Project, building payment system capacity and merchant services for smaller transit agencies, and the need for digital customer first thinking in a paper based industry.
Scroll down below the audio player for an edited excerpt of our conversation, or click here for an unedited, AI-generated transcript of the entire conversation.
Jeff Wood: That gets into the question I had about open loop payment systems too: Why are these so important to implement? What’s the thing about a card system that’s better than a fast pass or the Clipper Card or anything along those lines that’s been used in the past — or the cash fare box for that matter?
Gillian Gillett: What’s most important from a public policy perspective is making sure that everybody can participate in society. And that includes that everybody can transact. That everybody can receive services and pay for services of their choice. That doesn’t work in the United States because our social safety net doesn’t include the idea of an account.
It used to. When I was a kid, I used to be able to go to the bank, to the Post Office, and sign up for postal banking. That stopped when I was super small. I’m not advocating for the Post Office to get into banking. However, the United States doesn’t regulate banks for consumers. So what I mean by that is, in Europe and in other places, every bank is required to issue a basic account that has no minimum balance requirements, no fees, no overdraft fees, blah, blah, blah, so that everyone can receive and pay for services and stuff.
The United States doesn’t require that, so every bank here gets to decide its own minimum balance and fees that come along with guarding below your minimum balance and the fees that go along with your overdraft fees, blah, blah, blah, blah, blah. And so that has the effect of locking about 30 percent of America out of the banking system.
So you have these underbanked, which is the biggest portion, and unbanked consumers who rely therefore on cash and other alternative payment mechanisms. That means that we have an economic system or financial system that excludes 30 percent of the people — and therefore excludes the merchants that support those people.
So some businesses are disproportionately in the cash business and efforts have been made to reduce that by like Square. Square, all of a sudden, 10 years ago, like coffee shops and dry cleaners started spouting the little buttons so that now you can pay them, right? Those are small ticket vendors, but Square was focused on the private sector.
In many ways, what we’re doing is what Square did for small merchants. We’re doing that for transit, right? But like the financial system, transit is also a network play. So most people in America do pay by credit or debit. That is the payment method of choice in the United States, but because transit and its customers have been left behind, it winds up not participating in that.
And so two things happen. One is the longer we continue to issue closed loop stuff, ersatz accounts, rather than letting people have their own account and use that account by either bank account, the longer we ourselves are barriers to financial inclusion for our customers, but also the longer that we’re forced to build our own niche, non-scalable, boutique, bespoke products that nobody else will use.
So the costs go up and the massive delta between the consumer experience everywhere else in real retail and ours continues to increase. And we have to remember in our industry that, from a policy perspective, there’s a hierarchy of policy outcomes, and I would say, getting America banked, everybody banked adequately is probably more important than public transportation at the end of the day.
People need to be able to receive and spend money, but we have to also remember that our real competition here is the car. I can give you a driver’s license in California. You can use it in Massachusetts. I can give you a blue placard in Massachusetts. You can use it in California. If I give you a discount on transit as the FTA requires at my agency, you can only use it at my agency.
Everything about the car is seamless except for traffic, right? You get in a car and it says, do you want to use your Apple airplay, right? Like none of that thinking and consumer experience applies in the transit sector. So it’s no surprise that people who have a choice don’t choose transit, right? Ninety-seven percent of Americans don’t even think about taking transit. That’s the game.
Dan Baker: I think why open loop is important in Connecticut is right now we do have a closed loop smart card. That’s called the GoCT card, but it’s only available for CT transit services. So it’s not accepted on those independent transit districts that I talked about earlier.
If we can implement a payment standard that’s accepted everywhere. It unlocks that box. And it opens up so many more opportunities for people to travel across the state across providers. And we do have a fare capping policy in place through our GoCT card. We were one of the earlier agencies to introduce it in 2018. We will be extending that fare capping policy through our open payment system. Looking at it from that element, that’s important and something that we’ll be thinking about as we move forward.
And one of my favorite comments that I got when we did public engagement on a statewide level in 2022 — we got over 4,000 comments, we did 36 pop up events all across the state bus hubs, rail hubs, all over — and somebody wrote in and they said, “I want to be paperless, cashless, cardless, contactless,” and I just I thought it was a very, eloquent and succinct way of saying that, “Hey, this is how I pay everywhere else — how come I can’t pay like this on the bus?”
