The financial services industry and public transit experts across the country are closely watching the Metropolitan Transportation Authority's highly anticipated contactless pilot for the New York subway and bus system, as key industry players say the success of this project could finally kickstart the long wished-for adoption of contactless payments in a critical financial market and, by extension, across the country.
The One Metro New York pilot will test the use of contactless cards and app-based mobile wallets to see whether the massive New York bus and subway system can handle millions of commuters using tap-and-go technology to speed travel between public transit hubs and on city bus routes.
"Today marks a huge step on a journey to bring our fare payment system into the modern era, allowing for a better customer experience for millions of MTA riders and employees," MTA Chairman and CEO Patrick Foye said in an announcement from the agency.
The initial testing will involve station stops between Grand Central in Manhattan and Atlantic Avenue-Barclays Center in downtown Brooklyn, the home of the NBA's New Jersey Nets and a major transfer point for connections throughout the borough. The pilot phase, which continues through the end of the year, also will include a test for bus riders on Staten Island.
According to the MTA, the remaining subways, buses and Staten Island Railway will be upgraded by late 2020. The system currently supports single ride fares during the testing phase, but will eventually allow riders to buy unlimited ride fares and other special fares. MetroCards, which are currently swiped through turnstiles, will still be valid until 2023. After the NYC subway and bus system is upgraded, the contactless network will be integrated into the Long Island Railroad and Metro-North Railroad.
Major payment networks including Visa and Mastercard have announced plans to roll out contactless cards through issuing banks and hope that the pilot will not only spur adoption of mobile wallets by commuters, but also will kickstart additional use at convenience stores, grocers, restaurants and retailers located near subway stations and bus stops along the way. Mobile wallets like Apple Pay, Google Pay, Samsung Pay, wearables like Apple Watch and Fitbit and Discover Card will also be accepted. An OMNY stored value card will be introduced for subway and bus riders paying with cash.
"The payments brands will be following the payments trends closely during the initial phases of the MTA pilot," Randy Vanderhoof, director of the U.S. Payments Forum, told Mobile Payments Today via email. "They will be doing heavy marketing and education to retailers to encourage more tap and pay."
Card adoption
American Express officials say they believe that contactless use in public transit will help increase overall adoption of contactless cards by consumers.
"We've worked with transit systems around the world as they have moved to contactless — from the Tube, trains and buses in London to, recently, Sydney ferries, trains and light rail system — and often see that once consumers experience the speed, convenience and security of contactless payments in their transit system, they are more likely to tap and pay at restaurants, retailers and more," Liz Karl, vice president of payments consulting at American Express, told Mobile Payments Today via email.
Karl said that contactless will help merchants as it provides a preferred payment method; improves efficiency at the point of sale by moving customers more quickly through checkout lines; reduces the need to handle cash; and optimizes operations.
American Express is working with Cubic Transportation Systems to integrate contactless payments with the MTA and to help accelerate similar programs with other systems around the world.
Starting in July, all newly issued and replacement American Express cards will be contactless, according to the company. Currently, customers can request a contactless card through the company's mobile app, by phone or online at AmericanExpress.com.
Contactless upgrades
JPMorgan Chase, one of the largest consumer banks in New York and a major issuer of credit and debit cards, said it has seen public transit generate consumer interest in contactless use in major international markets.
"Transit has proven to be a tipping point for tap-to-pay adoption in countries like the U.K., Canada and others," Chase spokesperson Maribel Ferre told Mobile Payments Today via email. "The MTA rollout will help accelerate adoption in the country, making it easier and speedier to get around New York."
Ferre said that Chase has rolled out 20 million tap-to-pay credit cards to date, and that about half of the bank's customers will receive a contactless card by the end of the year. She said debit cards will begin rolling out this summer.
Chase customers are getting new contactless cards as they come up for renewal or with a new account opening, she said. Customers can order a new contactless card through the Chase mobile app or by calling a number on the back of their existing card.
Europe embrace
Integrating tap-and-go into public transit systems has promoted increased adoption of contactless in the U.K. and continental Europe, according to Windsor Holden, an analyst at Juniper Research.
He said that in 2018, Transport for London customers logged 872 million journeys using contactless, accounting for more than 50% of all pay-as-you-go journeys. Travelers made 13% of their contactless ticket purchases via smartphone.
Research from a 2018 study by Paysafe shows that only 3% of U.S. shoppers used contactless cards compared with 54% in the U.K., however, U.S. banks are rolling out contactless credit and debit cards to replace existing cards.
"Furthermore, contactless card solutions have also been rolled out on numerous transit systems outside the capital and these are also experiencing strong adoption," Holden said in an email to Mobile Payments Today. "Clearly the U.S. transport authorities will have taken heed of this and will be anxious to replicate this success."