Article Highlights

Key Takeaway:

The Los Angeles Department of Transportation, or LADOT, is the latest agency planning to launch a pilot through the state’s Cal-ITP program. The program seeks to help agencies procure the technology they need to accept open-loop payments. LADOT seeks to accommodate low-income riders with the city’s Angeleno card.

Key Data:

The underbanked, which make up more than 20% of California’s population, do, in fact, have conventional bank accounts and debit cards but do not trust banks because of the fees they charge, said Cal-ITP program director Gillian Gillett. That includes a fee for going under the minimum account balance.

Organizations Mentioned:

• LADOT (Los Angeles)

The Los Angeles Department of Transportation, or LADOT, the city-owned transit agency that runs fixed-route and commuter bus service in and around the city, plans to launch a trial of open-loop payments as part of the California Integrated Travel Project, Mobility Payments has learned.

The pilot will provide a key test of an alternative open-loop payments card, the Angeleno card, which underbanked, unbanked and other low-income people use. These riders, who often don’t have conventional contactless credit or debit cards, could tap the Mastercard-branded prepaid debit card on bus validators to pay fares.

Seleta Reynolds, LADOT’s general manager, described the planned open-loop trial in a funding request to the Los Angeles City Council’s Transportation Committee Feb. 15. Her department was asking the committee to vote on $650,000 in funding for the trial, as part of a total $4 million package to pay for the agency’s Universal Basic Mobility program. The program helps give low-income residents in the city more transportation options.

Metro Preparing Open Loop for 2028 Olympics?
As part of her memo to the committee, dated Feb. 10, Reynolds mentioned that another transit agency, the Los Angeles County Metropolitan Transportation Authority, known as Metro–which is much larger than LADOT–is also considering accepting contactless open-loop credit and debit cards. “Open-loop payments are part of Metro’s initial project list for the 2028 Olympics,” she wrote.

But Robin O’Hara, a senior executive officer in Metro’s TAP fare-payments program, told Mobility Payments, that the agency has not yet decided to support open loop, either with technology procured through the state of California via the Cal-ITP program or elsewhere.

“We still have a lot of decisions to make as to whether open loop will be suitable at Metro,” she said. “We are still a ways off from buying new technology.”

LADOT, has apparently only committed to an open-loop pilot so far, not a full rollout. The agency is expected to get the funding for the pilot along with money for the rest of the Universal Basic Mobility program. The city council’s Transportation Committee approved the $4 million request last week, though it may still have to get the green light from the full city council. But the money for the program had already been allocated in the city’s fiscal year 2022 budget, Reynolds noted.

According to her memo, LADOT proposes to spend $150,000 to buy and install 110 validators to equip all of its Commuter Express buses to accept open-loop payments. The rest of the requested $650,000 in funds for the pilot are for Commuter Express subsidies, at $300,000; community outreach, $100,000; evaluation, $50,000; and software, $50,000.

LADOT’s Commuter Express service transports passengers to and from downtown Los Angeles and various locations in Los Angeles city, county and beyond. A high percentage of passengers on both LADOT’s DASH fixed-route and Commuter Express buses are underbanked and unbanked.

LADOT’s Reynolds

“Research suggests that more and more Americans use contactless credit and debit cards and digital wallets,” wrote Reynolds in the memo. “However, 25% of Californians remain underbanked or unbanked and are unable to access the digital economy.”

Without credit or debit cards, these riders can’t use many of the transport options available in Los Angeles, such as dockless scooters and rideshare, she noted.

“The city of Los Angeles provides residents the Angeleno card, a contactless, open-loop payment card and account to overcome these barriers,” said Reynolds. “However, the Angeleno card is not integrated with transit payment platforms and cannot be used on city or regional buses.”

Reynolds added that the open-loop fare payments system to be trialed would enable pay-as-you-go fare payments and fare capping, including monthly capping. This would help low-income riders who can’t afford to prepay for monthly passes.

The city introduced the Angeleno card in the summer of 2020 to help distribute Covid-19 relief funds. A little more than a year later, it announced an expansion to the program, with “Angeleno Connect.” The program provides qualifying low-income residents with a bank account without fees; a Mastercard-branded debit card, which cardholders can load and make withdrawals, also without fees; and a mobile app to help users manage the card, as well as access city services. Fintech Mobility Capital Finance, Inc., or MoCaFi, oversees the implementation of the program.

Bank Card Alternatives
Backers of California’s statewide open-loop payments initiative, Cal-ITP, have mentioned the Angeleno card as one example of an alternative open-loop card that the state’s large population of underbanked and unbanked could use to pay fares. Another is the Square Cash Card, connected with Square’s Cash App. This Visa-branded card also could be used by young people or other riders without conventional credit or debit cards or who don’t want to use them to pay fares.

Monterey-Salinas Transit, the first agency to trial open-loop fare payments through the Cal-ITP program, is also testing use of the Cash Card, along with a separate test of support for senior discounts linked to riders’ open-loop cards.

Gillian Gillett, manager of the California Integrated Mobility program of the state Department of Transportation, which includes Cal-ITP, told Mobility Payments that accommodating riders without conventional credit and debit cards or who avoid using them is an important part of the program.

That includes the underbanked, which make up more than 20% of the state’s population. Many of them do, in fact, have conventional bank accounts and debit cards but do not trust banks because of the fees they charge, including one for going under the minimum account balance.

“So the point that we’ve been advocating for, and it’s correct and true, is that having an account–the ability to transact–and having money in the account are two different problems,” she told Mobility Payments. “We have all these alternatives now. We have Venmo. We have Square. We have PayPal. We have other vendors like the Angeleno card in Los Angeles.”

The California Department of Transportation formed Cal-ITP to help the state’s nearly 300 public transit agencies–most of them small bus agencies–to buy the core technology they would need to accept contactless open-loop payments. The state is concluding master service agreements with vendors to supply validators and fare-calculation software and services. It has already contracted with acquirers. The open-loop system components are designed to be plug and play.

To date, at least four agencies in the state have launched open-loop pilots: Monterey-Salinas Transit, two other small agencies in Santa Barbara and the Sacramento Regional Transit District, the latter for its light-rail trains only. Open-loop transaction numbers are small so far.

Cal-ITP plans to open up the procurement program to agencies in other states, as well.

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