The California Integrated Travel Project (Cal-ITP) has been a driving force behind the introduction of contactless open-loop fare collection by small and mid-sized transit agencies in California and beyond.

Its Mobility Marketplace makes it simpler for transit agencies anywhere in the US to buy and deploy the three essential components of an open-loop fare collection system: fare validators, fare calculation software, and a payment processor.

In this interview, the first in our ‘Meet the Mobility Leader’ series, Carl Sedoryk, General Manager and CEO of Monterey-Salinas Transit (MST), shares his experience of implementing contactless open-loop fare collection using Cal-ITP’s framework. He discusses its impact on MST’s transit operations and on the communities the agency serves.

You were the fifth transit agency in the US to deploy contactless open-loop payments and the first in California. Was it rewarding for MST to be a trailblazer?

We were the first in California and the first in an urban area of under a million, which was a source of great pride. MST has often found itself at the forefront of different and new technologies. For example, more than a decade ago, we introduced 100% locally sourced biodiesel and later were a leader with on-street, inductive-charged, zero-emission vehicles. The MST board of directors encourages staff to seek the best solutions, so we are often early adopters of new technologies.

Apart from the desire to innovate and modernize, were there other compelling factors that led MST to launch contactless open-loop payments?

The Covid crisis accelerated the use of ‘touch-free’ payments and prompted the State of California’s Department of Transportation and Cal-ITP to explore this technology. The State asked MST to lead its first contactless demo in May 2020. We found it not only reduced the amount of currency touched, but also the time it took for people on the bus to pay. Once we saw the benefits, the demo morphed into a broader application.

Did the Cal-ITP framework make moving forward with open-loop payments easier?

Absolutely! As a smaller agency, we don’t have the purchasing power and leverage of larger organizations. The Cal-ITP initiative gave us an affordable way to implement this technology fully across all our buses. Its Mobility Marketplace makes it easier for all sizes of transit agencies to purchase a system, using standard agreements and pre-negotiated pricing.

In addition, the modular system they promoted didn’t require us to interrupt our existing fare collection system, but we could augment it with this technology.

What KPIs did you evaluate during the pilot to determine whether you would continue?

Reliability was a key factor for us, as were the adoption rate and the cost per transaction. We had some issues with connectivity at the start, but after switching to using Kuba validators, we haven’t experienced any further downtime.

Initially, we saw an organic adoption rate of 5% of transactions, which was an acceptable baseline, considering we didn’t actively market the solution during the first two years of the demonstration. As we recovered from the impact of the Covid-19 pandemic, our ridership doubled, and we saw the share of contactless EMV transactions grow. Now, the use of contactless is keeping pace, with little to no marketing.

As far as cost per transaction is concerned, it’s our ultimate goal to phase out cash. If we achieve that, we will cut the considerable cost of maintaining fare boxes and handling cash, as well as speed boarding time, improving on-time performance. Right now, with contactless, interchange fees for credit card transactions are an issue. We are working with Cal-ITP, national associations, and state and federal legislative and regulatory authorities to lobby for public transit operators to receive a preferred rate. This would remove one of the major barriers to maintaining open-loop fare collection systems for the long term.

Why is cost per transaction such an important measure of a ticketing system’s success?

The customers we serve are some of our community’s lowest-income and most vulnerable members. Anything that increases our costs ultimately results in either reduced service levels or increased costs for these people. Like most transit agencies in the US, we are not-for-profit, but we must maintain financial sustainability to achieve our vision.

How has ridership recovered since the impact of the pandemic?

MST no longer thinks in terms of pre-pandemic / post-pandemic ridership. This is in large part due to the direction our governing board took in 2021 to adopt a new model of service that focuses our transit resources on the communities where they are needed most.

We now concentrate our resources in disadvantaged communities where poverty is the highest and car ownership per capita the lowest, rather than attempting to provide services where the need may not be as great. So, it is not our only goal to increase ridership; but to provide mobility options where they are needed in the community. It may result in slower ridership recovery, but it will bring more public good.

In December 2022, MST implemented the Board’s new vision with our ‘Better Bus Network’, which made travel more direct, faster, and lowered passenger costs through a new fare structure of fare capping at $2 for 2 hours, $6 per day, $20 per week, and $70 per month with 50% discounts offered to seniors, veterans and persons with disabilities.

Close to 37% of unique riders have enjoyed the benefit of hitting a fare cap each month. Since its implementation, MST ridership has increased by 48.8% over the past two years with the majority of boardings occurring in our most disadvantaged communities increasing by 10.5%, and contactless transactions have more than doubled over that time.

MST is purpose-driven, can you explain your vision as a transit agency?

Our brand vision is connecting communities, creating opportunities, and being kind to the planet. We’ve changed our network to focus on communities that depend on our services, whose inhabitants may not otherwise be able to get to work, school, and medical appointments.

In Monterey County, these are people with very low incomes, such as farm workers, hospitality industry workers, and retail workers, as well as full-time students, retirees, and disabled persons on fixed incomes. A recent survey showed that over 80% of MST passengers ride the bus because they don’t have a car or can’t drive, so we see it as crucial that we provide for their essential journeys.

How does the contactless system improve access to transit for low-income people?

Before our contactless system was introduced, a monthly pass cost $75 a month, which is a lot. Contactless allowed us to introduce fare capping. If riders tap-to-travel, there are fare caps in place for a day, week, and month. When the accumulated fare for trips taken in this fare cap window reaches the cap limit, riders don’t pay any more for additional travel.

In the US, the cost of car ownership is the second highest expense most people have, beaten only by the cost of housing. For low-income people, having an economical way to pay for public transport without a steep upfront cost, and to be able to cap that expense, is very important. It makes it more affordable to ride transit, and easier to budget for the cost.

MST is the first transit agency in the world to enable any senior, veteran, or person with a disability to log in to a third-party government portal to validate their identity and take advantage of a 50% discounted concessionary rate. These groups can then receive discounts every time they travel using a linked card, without a laborious paperwork process.

Traditionally, public transit agencies are too involved in verifying a person’s identification and eligibility for concessions, when all that information exists elsewhere with various state or federal databases. The online verification tool we use – Cal-ITP Benefits – can be adopted by other transit agencies to save time and hassle for their staff and their riders.

During MST’s contactless pilot, did you hit any major issues you weren’t expecting?

We had our first meeting in May 2020 and went live exactly twelve months later. This isn’t bad for new technology and being first with something. Especially since this was during a worldwide pandemic, with some of the supply chain disruption that caused.

We did have an issue with the original validators we used, which were not supplied by Kuba, when our local service area switched from 3G to 4G. When selecting fare validators, I recommend transit agencies to check for connectivity issues in their service area as part of their due diligence. We found that different validators had very different successes with connectivity.

Since switching to Kuba fare validators, It is extremely rare to experience a device failure with devices operating well over 100,000 transactions before experiencing a device issue. Interestingly, with our fare boxes that collect coins, and bills, and accept contactless closed-loop payments, we experience a failure of those devices about every 9,000 transactions.

Does this mean that cash fare payments are on their way out at MST?

My goal is to eventually discontinue collecting cash on board the buses and migrate to a fully contactless system. The goal is to move people away from cash as quickly as possible, but we know this will take time. A realistic timeframe would be around three years.

What advice would you give a transit agency thinking of moving to contactless?

Look at how your existing fare policy creates barriers to entry to your system and find ways to remove them. With contactless payments, a combination of open-loop and closed-loop solutions (for a time) can reduce transaction costs. But it also minimizes obstacles to using your system, and helps you, as a public transit operator in the US, provide greater public benefit.

Is there anything on your agenda for ticketing and payments in the immediate future?

We’d like to expand our paratransit fleet and partner with local taxicab companies that provide discounted services to seniors, veterans, and persons with disabilities. In the future, we aim to have a public transportation network that connects with partner companies like Uber or Lyft. We envisage that people can use the same card to purchase bus trips, and trips by micro transit and micro-mobility solutions like electric scooters and bikes.

That’s the long-term goal of a more connected mobility system we hope to establish.

Monterey-Salinas Transit broke new ground with its launch of a modular, contactless open-loop fare collection system. Read more about the agency’s pilot and rollout, supported by Kuba and Littlepay.