Abstract:This study explores interest in, and the challenges faced by transit agencies and operators in the adoption of open-loop payment systems. The research team focuses on the ways that agencies view passenger needs in the context of adopting open payments. Challenges with cash payments, an increasingly cashless society, and the expanding offerings of digital payment options have spurred increased interest in open-loop payments among transit operators. Paying for transit with cash can require additional time at boarding, add extra steps for passengers who must pay with exact fare, and result in service inefficiencies. It presents security concerns for drivers, and administrative burdens for agencies. While the full costs of cash handling vary per agency, the cost of handling and moving cash may be considerable. Pioneering transit agencies are adopting open payment systems that accept credit cards, debit cards, and smartphone/watch-based transactions. However, there is a huge diversity among transit agencies and as such, agencies face different challenges and to different degrees when considering the adoption of open payment systems. Challenges can include financial barriers, capacity limitations, technological challenges, the duration of existing contracts, competing needs, and a number of passenger challenges such as lack of credit cards or smartphones, or lack of familiarity with the technology. This study uses data collected from California transit agencies in the fall of 2022 that gathered information about agency perceptions of open-loop payments and the challenges with adopting open fare collection systems, and whether assistance programs would benefit transit agencies interested in adopting open-loop payments. Results of the present study indicate that the majority of agencies are considering or have considered implementing open payment systems, but agencies are not fully aware of the assistance available from the California Integrated Travel Program to help in the transition to digital and open payment systems. This study sheds light on the challenges facing small to medium transit agencies in the transition of California’s transit systems to open-loop payment systems.