Public transportation agencies can use prepaid cards to persuade unbanked riders to use cards instead of cash to buy fares or transit cards, according to a report released this week by the Smart Card Alliance. The alliance, which is based in Princeton Junction, N.J., is a nonprofit association that promotes smart card technology. Transit agencies want to sell multiple-ride plans, such as weekly and monthly passes, and reduce the amount of cash they need to manage, Randy Vanderhoof, executive director of the alliance, tells CardLine. Many of the agencies also want to collect fares with contactless cards and readers. Unbanked commuters rely mostly on cash to pay fares or to buy transit cards at such point of sale locations as retailers and vending machines, the report notes, adding consumers with bank accounts and credit cards can buy smart transit cards and reload them online. "The costs of providing sufficient places to obtain, load and reload a transit smart card are significantly higher among the population of unbanked than for those with 'plastic' cards," the report suggests. Transit agencies can lower those costs by arranging for unbanked commuters to buy and automatically load transit cards with prepaid cards, according to the report. Agencies also could consider offering their own private-label prepaid cards with a bank and a processor, the report states. Vanderhoof says that even if transit agencies need to take cash to sell the prepaid cards, they can reduce the amount of cash they handle and the number of locations accepting cash, thus reducing costs. "It is clear that with appropriate thought and planning, agencies can tap into the new channels for prepaid cards to help reach the unbanked and lower costs for fare collection systems accordingly," the report states.

Subscribe Now

Authoritative analysis and perspective for every segment of the payments industry

14-Day Free Trial

Authoritative analysis and perspective for every segment of the industry