Test Could Put Contactless Cards on Express Track

By Wolfe, Daniel | American Banker, June 1, 2010 | Go to article overview

Test Could Put Contactless Cards on Express Track


Wolfe, Daniel, American Banker


Byline: Daniel Wolfe

Three New York transit agencies are kicking off a contactless payment test today that they hope will show credit and debit cards can replace closed-loop fare cards - and lead to wider use of contactless cards in general.

An earlier test used only MasterCard Inc. cards issued by Citigroup Inc., but this phase expands that to include other issuers and card brands. Observers said the program could spur the use of contactless cards for other purchases and encourage other cities to consider the payments technology for their transit systems.

MasterCard, which developed the contactless fare technology, said this could be the last evaluation before New York transit agencies decide to accept bank cards throughout the entire system.

"After this phase, our hope is that ... we're able to move into a full launch and have it be the case that there is no longer a MetroCard," said Joshua Peirez, MasterCard's chief innovation officer. New York's ubiquitous orange fare cards could end up "in the museum, up next to the tokens."

New York's Metropolitan Transportation Authority agrees - it's not a question of if, but when, bank-issued contactless cards will replace its MetroCard. "Our chairman's vision is that this becomes an MTA-wide fare-pay system," said Amy Linden, the MTA's senior director of new fare payment systems.

Beth Robertson, the director of payments research for Javelin Strategy and Research in Pleasanton, Calif., said"Transit is a great application" for contactless because it "can really facilitate the process and it can be so convenient."

And "as people become familiar using that payment device in a transit application, then they're more comfortable using it in other applications as well," Robertson said.

Beginning today, contactless credit and debit cards can be used to pay fares on some buses and trains operated by the three main New York transit systems, including most of the Port Authority of New York & New Jersey's PATH train stations and three NJ Transit bus lines. It also adds some MTA bus lines and revives acceptance for the MTA's Lexington Ave. subway line that was the focus of the first test.

The test is expected to run for six months. Riders can now use any issuers' MasterCard cards, and in two months they will be able to use any contactless Visa Inc. cards as well. (MasterCard gets a two-month exclusive arrangement because it is a major player in the project; Visa was invited to join because the participants recognize that accepting more cards would make the system more useful to riders.)

The MTA's vision is to become just like any merchant, Linden said, accepting bank-issued cards rather than having to manage its own closed-loop system. Eventually the MTA wants to be able to hand off the expense of managing a payments system. In particular, customerservice issues related to payments would be handled by the issuers and not by the MTA, Linden said.

The current test is not meant to determine whether the MTA can replace its MetroCard, but whether MasterCard's system meets its needs.

"We will move forward," Linden said. "That doesn't mean we have all the answers to how we deploy it."

The benefits to the MTA would be substantial, particularly for its more than 6,000 buses, she said. Today, buses accept MetroCard payments without any kind of wireless hookup to the agency's payment system, so the transaction logs don't get downloaded until the buses come in for maintenance at the end of the day. Downloading this data is extremely time-consuming, she said; it sometimes takes longer than all the other maintenance tasks for a bus needs. …

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