The rules shaping transit-focused fintech

Transit-focused fintech solutions are governed by a dynamic set of regulations. These vary according to region and authority—but, across the board, fintechs should anticipate building in data protections, potential onramps for digital-currency projects, and a need to serve underbanked and cash-dependent customers while also moving the needle.

Data protection

Due to their scale and public impact, transit-focused fintech solutions are subjected to greater scrutiny than payment products impacting other sectors. Transit riders are almost invariably obligated to use these systems, which complicates notions of informed consent or rejection. As such, transit agencies may require more stringent data protection and privacy measures than national standards require.

Sometimes, these privacy measures are only fully implemented after public calls for accountability. Most recently, looking into New York’s OMNY payment system, 404 Media discovered that anyone with a rider’s card number and expiration date could track their trips from the past week—a privacy flaw that one expert dubbed “a great fit for abusers.” Privacy experts also expressed concern over law enforcement agencies’ ease of access to rider data through the new digital system. With this mixed track record, local advocates continue to push for transparent and stringent data-safety measures, as well as redoubled efforts to make OMNY an accessible system for unbanked riders.

Digital currencies

Despite the controversy of such programs among right-leaning politicians in the US, initiatives like central bank digital currencies (CBDCs) could be useful for transit systems. In China, the digital yuan (or e-CNY) is now being used in the city of Guangzhou in addition to eight other cities.

Using the digital currency lets users keep track of payments across buckets within one app, and merges the digital wallet with the insights generated from balance statements and other personal financial data.

The fate of these public digital systems in the US is uncertain—but regulators and private market actors will certainly look at China’s pilot program to gauge its utility and promise here.

Serving the unbanked

Transit systems help move working-class people across cities and regions. Some of these customers lack access to digital payment systems—without smartphones or bank accounts. Dependent on cash, they continue to rely upon more analog systems to access crucial transportation. Fintechs offering transit solutions should keep unbanked and underbanked customers in mind, or else risk failing to secure contracts with transit agencies.