I believe it is an imperative to make the 60 million underbanked people in the US upwardly mobile.  It will create an enormous impact on the GDP, increase the strength of the American Middle Class, and create a tremendous about of financial freedom, which this group lacks in big ways.

I don’t think mobile payments are likely to create this upward mobility, or not in the next five years.  But transit, on the other hand, might hold an important key.  Several major metros in the US are following suit of international “open-loop” transit payment systems, like Hong Kong’s Octopus and London’s Oyster.  Can we soon expect the LA Squid and Chicago Clam networks?  And if so, what’s in it for the underbanked?

Minneapolis-based Ready Credit is taking a bet transit is big.  They have partnered with Visa and yesterday announced the first TAP prepaid card that will be usable in LA transit.  Both an embossed and instant issue card with the TAP contactless technology embedded, will pay for LA subways and buses AND be accepted anywhere Visa is, just like any other branded GPR card.  Coupled with Ready’s kiosk-issuing capabilities this could present a new scalable distribution channel.  Really?

For many big transport systems, low and moderate income underbanked consumers present a majority of their users.  New York might be a notable exception, where everyone from the increasing homeless to any remaining hedge fund billionaires take the subway.   So there is a clear, addressable market.  In the new open transit systems, most users will likely be debit card users, followed by credit card users: the major banks will issue these specially equipped cards in local markets.  So if 20% of the general population is underbanked, it’s reasonable to guess that it’s 40-50% of public transit users.  For them, coupling prepaid with transit offers clear convenience.  I’m not clear it offers more: potentially a discount on fees (but cheaper than Wal-Mart?), the trust endowed to a public service, or other features a large municipality may want to afford its lower-income citizens (savings, credit building, that kind of thing).  Still, convenience can go a long way, especially to those who have been afforded relatively little.