The end is near for New York City's Metrocard

New York City's iconic Metrocard is on its last legs. Its replacement? Any debit or credit card in your wallet. Here's why.
Written by Andrew Nusca, Contributor

Several years ago, fare payment system provider ACS Transportation Solutions installed special turnstiles in the New York City subway and bus system run by the Metropolitan Transit Authority as well as on New Jersey Transit's system.

The idea: allow straphangers to pay at the turnstile using their credit cards, skipping the need to purchase a Metrocard (in New York) or ticket (in New Jersey) to use the system.

Since then, several U.S. cities have inquired about "smart card" or contactless fare payment systems. But the special turnstiles remain scattered throughout the New York and New Jersey transit systems.

What happened to the project, and what did they learn? I spoke with ACS Transport vice president Mike Nash.

SP: I see these special turnstiles every morning on my way to SmartPlanet HQ in NYC. What's the deal?

MN: The story began several years ago when the folks in New York were interested in a better way to do transit fares. They had modernized in the '90s with technologies that were new enough, but with no standards. It was a proprietary smart card system. Considering the complexities, there was some discomfort from that.

The upshot was that the New York guys said that they were looking for something better. In New York, everyone's using credit cards. Why couldn't they just use the cards directly, and by the way, if they did that, you move to an industry with standards?

Once you open up the system, it can accommodate innovation.

Almost every fare collection implementation in the world was behind schedule by years. The contract in San Francisco was designed in 1998 and they still haven't finished it. To make a long story short, Mastercard stepped up and covered the cost, and that solution was limited to the Lexington Avenue lines, with cards issued by Citi.

SP: That's my subway line in Manhattan. I never see anyone use the turnstiles, though.

MN: Well that one was closed down -- it was limited to folks Citi solicited. It was primarily a technical pilot, and it worked.

A decision was made to expand it to the Phase 2 pilot, adding the MTA buses and the PATH train [connecting New York and northern New Jersey] and New Jersey Transit routes. The test was to see how people would react to riding a commuter bus in from New Jersey, taking the PATH train across and hopping on one of the MTA's vehicles -- all using the same card.

Today, you can't do that. It was designed to see how well the equipment would work on a bus, in a mobile environment, where there was a dependency on communications equipment to communicate to the back office. You move the intelligence of the system to the back office, and not at the point of transaction, which has enormous flexibility in changing parameters. You don't have to download anything.

It was very positively received. Eighty-six percent of consumers were very satisfied with the program. Typically the only comment you'd get is, "Why can't I use it everywhere?" New Jersey Transit continues with it today.

What's happening now is -- in the U.S., London -- cities like Chicago, Dallas, Washington, Philadelphia, Toronto have all released the intent to use an open system with bank issued cards.

SP: So we're approaching critical mass for the technology. What are the challenges that remain?

MN: Everyone is jumping on the bandwagon. A year ago, all the other system integrators were saying it couldn't be done. One of the major achievements of the New York pilot is how the industry has converted from that [skepticism] to being experts in it.

New York is like everywhere else, but on steroids: many more devices, many more trains. The implementation issues remain the same. Technology is not the issue anymore -- sure, you need to make sure the wireless network is sufficiently robust and address areas that are weak -- but the back office systems scale to huge levels, as big as EZ-Pass levels. We can drive thousands of transactions through it without losing them. All of the pieces are there.

One of the big challenges in rail is that rail systems extend further, so you have to watch wireless coverage and where that goes. And there's the common urban canyon effect, which needs to be studied further. It has not been an [insurmountable] issue, but it means that the building is blocking a signal. It's less an issue now, with cellular coverage -- so much capacity has been put in.

SP: Are you telling me that I'll be able to commute from my home in Philadelphia to my office in New York without buying four tickets for four different transportation systems?

MN: Yes, that's the beauty of this. It's like going to Macy's and Starbucks and another store -- those prices are settled with each merchant individually. You could use the same card to go from SEPTA to New Jersey Transit to the MTA, and none of the agencies have to do anything to make that happen. That is a huge improvement from the current scenario, which requires agreement on technology and a fare structure and settlement. That takes up to two years for agencies to negotiate cost and revenue splits. By moving to open bank card approaches, all of that goes away.

If there's an opportunity to give a discount or special fare for people to use across systems, that can be added in. If you tap into four different readers within a certain time frame, for example, you get a special rate. You just have to assemble the data.

The bottom line is that we are being asked in all of these procurements to deliver systems in two to three years. Those are challenging, but the implementation time is considerably shorter. You also save time on some of the components that are now standardized. Every reader has to be certified by the bank association.

SP: Let's dream even bigger. If I went to London -- whose transit fare system is operated by your competitor, Cubic -- and used a contactless card to pay for a ride on the Underground and then took a transatlantic flight to New York, would I be able to use that same card to use the ACS system and hop on the A train?

MN: Yes. If you had a contact-less card in London, and you flew to New York, regardless of who wins these procurements, it would be the same card.

In fact, the transit agencies have disproportionate costs in dealing with occasional riders versus daily commuters, so the visitors would love that.

SP: Will New York's iconic Metrocard soon be dead?

MN: Yeah, I think that's going to happen. When I was working in Visa, grocery stores, gas stations and department stores had proprietary cards. One by one, those industries made the decision to make [branded] bank cards, and there have been a lot of co-branding occasions since.

If the dog won't eat the dog food, not much else matters. People like general purpose cards.

SP: That said, am I stuck using Mastercard if I want to pay for a fare in New York?

MN: They had some exclusivity because they paid for [the pilot], but Visa was accepted after that marketing period. All payment instruments can be used.

We've been putting a lot of thought into this. One of the discoveries we made a few years ago is that this is an account-based system. As long as you can direct a transaction to that account, the device can be varied: student IDs with chips in them, federal personal identification cards…I think smartphones are really going to happen.

I was with American Express for 11 years and had another five years with Visa and I've seen a lot of innovations. All of the technologies that focused on multi-application smart cards failed because of incompetent user interface -- a customer having no idea that a vendor is a part of it, for example.

The thought of sharing real estate with a consumer device didn't work, but with the phone, the [concerns] all go away. You can load an app. You can do a lot of things with a full-color interface that can guide you through it.

I'm bullish on NFC ["Near-field communications" technology --Ed.], but really more smartphones as a great device to carry many applications. It was profound implications for transit because one of the oddities that's not obvious is that sophisticated smartphones skew downward in terms of penetration levels -- people buy them to replace [Nintendo] Game Boys. Some good stuff going there.

SP: Where do the PayPals of the world fit in?

MN: All of these folks who offer bridging technologies -- it's not a proprietary technology. They still use the technologies that dominate the marketplace. We're happy to develop links to PayPal, Facebook or Google. It's only advantageous to the consumer.

SP: I'm going to ask you to go out on a limb: when do you think a basic majority of U.S. cities will offer this technology?

MN: Before 2020. New York is on a schedule to do it by 2017. SEPTA in Philadelphia, Washington, Chicago, Toronto are ahead of them all. Dallas. They've all put out publicly with RFPs. Cash is, and always will be, the most expensive payment method for a merchant.

The pace of change, even in transit, is expanding. Agencies are trying very hard to utilize new technologies to communicate with people to increase ridership. Better coordination, more information, improve services. As these things evolve, the riding public can look forward to a lot of enhancements, and it couldn't come sooner, because the integration of transit is so necessary at five bucks a gallon.

Photo: Carlos A. Martinez/Flickr

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