DEEP DIVE
Smart cities are resilient and future-ready. Here's why it's time to get on board
DEEP DIVE
Smart cities are resilient and future-ready. Here's why it's time to get on board
Government / Introduction / Deep dive
Technology that connects and optimizes city functions creates a smart city that's easier to navigate and enjoy. Smart cities aim to provide equitable opportunities for all residents by prioritizing affordable and better-flowing transit systems, convenient ways to pay for services and lower environmental impact.
Estimates show that 54% of the world's population lives in cities today, and that proportion is projected to rise to 66% by 2050 – adding 2.5 billion people to cities in the next 30 years. State and local governments know that providing citizens with smart, connected services can lower infrastructure costs, attract new business and create a resilient environment that meets the needs of everyone.
U.S. Bank, in collaboration with FT Longitude, interviewed financial leaders from public sector organizations to find out how they're transforming their cities through payment strategies that make it easier and more convenient to take care of everyday business – from accessing mass transit to paying for utility bills, judicial fees and more.
Here are four reasons why governments need to jumpstart their smart city strategies.
REASON 1
Rising competition for residents and businesses
Increasing competition between cities of all sizes means that state and local governments must stay on top of smart city trends that attract more people, create business-friendly environments and keep existing residents happy and proud of their hometown.
One way to stand out from competitors is by prioritizing quality-of-life enhancements such as a robust transit system that connects residents to work and entertainment/shopping destinations, and streamlined payment options for government services including taxes, licenses and utility bills.
In our survey, 53% of public sector finance leaders say their payment acceptance strategy is either not very or not at all advanced. Here is what they see as their priorities, and also some clues to the challenges they will face as they try to meet consumer expectations:
Security
80%
say they will soon implement, are currently implementing, or have already implemented payment security improvements
37%
say security is the biggest factor in decision-making about payment acceptance strategy
42%
plan to invest in fraud-management tools and technology in the next 12 months
Consumer payment preferences
65%
agree or strongly agree that it's essential they offer constituents ways to pay via their preferred method
35%
rank consumer payment preferences as the second-biggest factor in decision-making about payment acceptance strategy
When 47% of finance leaders say that customer satisfaction has decreased in the last 12 months, it’s time to acknowledge that customer satisfaction goes beyond security expectations.
Protecting private information is critical. But smart, integrated payments transformation can improve citizen lives at every level – from providing transit fare payment options for the unbanked to making it easier and quicker to pay utility bills. Innovating toward resilience enhances public perception of government as a trustworthy, human-focused entity that consistently understands and serves its constituents’ needs efficiently and effectively.
REASON 2
Citizens expect leaders to focus on social equity
More and more cities are realizing that democratizing opportunity through equitable access to services such as public transit and simple, flexible ways to pay leads to more satisfaction among residents and more stable revenue avenues for government.
Finance leaders can improve customer satisfaction by implementing programs that will reach all citizens, making the process of submitting a payment easy and flexible for everyone. Flexible payment options that serve the unbanked and underbanked can go a long way to improving quality of life for all residents.
In our research, 77% of finance leaders say their citizens’ preferred payment method is physical card payment (debit, credit or prepaid). But while the majority of residents might lean toward using physical cards to pay for services, optimizing to this kind of payment method can exclude unbanked and underbanked citizens. In fact, 32.8% of unbanked households use prepaid cards, compared with 5.7% of banked households, but this is still a relatively low portion of the unbanked and underbanked population.
The right payments partner can connect governments with prepaid card issuers for underbanked populations, while also offering omnichannel solutions that allow physical card acceptance for services including mass transit, events and parking.
Monterey-Salinas Transit, which serves a large farmworker community, decided to address lower physical credit or debit card use in the underbanked population by promoting cash app cards. These allow passengers to upload and use cash digitally via a prepaid debit card.
Governments can also encourage unbanked and underbanked people’s use of reloadable, prepaid cards for government and mass-transit payments by disbursing payments via reloadable debit cards.

REASON 3
Net zero communities are the future
From air-quality issues to natural-resource shortages, climate change affects how and where people live. In one 2023 study, 58% of Americans say local officials are doing too little to combat climate change.
Increasing opportunities for digital payments is one way for local government leaders to take action that lowers environmental impact – by reducing paper billing and waste associated with using physical cards. When only 45% of the finance leaders in our survey say contactless payment methods such as digital payments and QR codes are most popular with their citizens, there must be room to boost adoption.
Payment strategies that streamline government billing infrastructure and help lower a city's carbon footprint are popular with residents. Options such as electronic billing and presentment show residents the total billing cost and let them pay digitally if they choose to. Open-loop contactless payments for services such as mass transit help riders and the environment by reducing idling time, speeding up boarding, eliminating lost tickets and reducing paper and the plastic associated with physical cards.
This is not an either/or solution. A strategy that allows citizens to pay online in multiple ways, such as an online portal, a one-time buy button or even via PDF through email, can help to boost digital payments for those who want it without leaving behind the citizens who prefer physical transactions.
REASON 4
Funding is a growing challenge
Cost savings are a priority in a volatile economy experiencing inflation, rising wages and higher overall living costs. Nearly three-quarters (72%) of the finance leaders we surveyed either agree or strongly agree that keeping payment acceptance costs low is crucial to controlling expenses. Even innovative strategies that lower transaction costs for B2B payments – a priority for 40% of leaders – can help government to save money in new and unexpected ways.
Partnering with a knowledgeable payments solutions provider can help to close funding gaps with savings opportunities that include reducing:
- Infrastructure costs by streamlining workflows and eliminating redundancy
- Fixed transaction costs through open-loop mass-transit payments that bundle a resident's day of rides into a single transaction
- Transaction costs with service fee models for convenient options such as digital payments and mobile wallets
Stakeholder education at every level can boost awareness of how payments transformation can lead to long-term cost savings by reducing the financial costs of security risks, increasing on-time payments through accessible options and streamlining operations.
Overcoming roadblocks on the path to resiliency
Government agencies face many imperatives shaping their strategic path to becoming smart cities.
They must stay competitive, providing residents with accessible, easy-to-use mass transit and flexible, convenient payment options for services such as license renewal, utility payments and court fees. They must also focus on raising quality of life by reducing their carbon footprint, taking real action to combat climate change and prioritizing social equity. To achieve smart city status, they must be nimble, trustworthy and action-oriented about their community's expectations.
Our team can provide payment solutions and strategies for public sector entities that fulfill and support their goals of creating smart cities. To learn more, contact us and download our report.
Find out how your sector can use payments to increase resilience
Find out how your sector can use payments to increase resilience
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