Consumers' preference for using plastic instead of cash is prompting many transit authorities nationwide to switch their fare-collection methods to contactless smart card systems. The authorities prefer such systems to traditional magnetic stripe card acceptance because of faster transactions at the point of entry to buses and trains.

The Allegheny (Pa.) County Transit Authority is among the latest transit agencies to make the switch and plans to launch a proprietary, closed-loop system by the end of 2010, says authority spokesperson Judi McNeil. "People, in general, are so used to using credit and debit cards now, it's going to be a seamless transition [for our customers]," she says.

Allegheny County, which includes Pittsburgh, joins such cities as Chicago and Washington, D.C., in offering commuters a closed-loop transit card. All three cities are exploring the option of enabling commuters to pay transit fares using bank-issued contactless credit and debit cards. Allegheny County will first launch a closed-loop system, McNeil says.

Some agencies, including Bay Area Rapid Transit in San Francisco, are testing mobile-phone based Near Field Communication systems, which enable contactless chips to be used both for paying and receiving information, such as coupons or special offers. However, phones equipped with NFC chips will not be available on a large scale until later next year at the earliest, experts say.

In February, the Utah Transit Authority became the first U.S. transit agency to roll out an open-network fare-collection system. Commuters can use contactless credit and debit cards that use Visa Inc.'s payWave or MasterCard Worldwide's PayPass technology to pay for fares.

New York City has been testing acceptance of open-loop contactless cards since 2006. Citigroup Inc. is winding down the first phase of a contactless-payment test with the New York Metropolitan Transportation Authority. In a letter sent last month to trial participants, Citi said it switched the system off in May  in preparation for the second phase of the test. The letter did not indicate when the second phase will begin.

The Washington Metropolitan Area Transit Authority is close to accepting open-loop contactless, the authority tells ATM&Debit News. In May, the authority's finance committee proposed a plan to begin soliciting proposals to help support other forms of contactless payment technology besides closed-loop cards, such as bank-issued cards.

If approved, authority officials would submit requests for proposal in the next month and review them this summer. The authority has no set timeframe for the introduction of such a system.

The Chicago Transit Authority also may embrace open-loop contactless card acceptance.

The card networks will closely monitor those cities' open-loop contactless plans,  says Peter Quadango, founder of West Chester, Pa.-based card technology consulting firm Quadango & Associates.
 "Visa and MasterCard have been hovering around transit for a long time now," Quadango says.

Both card companies are involved in pilots for open-loop transit payments in New York (MasterCard) and Los Angeles (Visa). "[The larger transit systems] are moving to a model that may result in bank-issued cards becoming the vehicle of choice," Quadango says.

Allegheny County is exploring potential partnerships will local merchants to accept its card as payment for goods and services, a scheme similar to the Octopus card in Hong Kong. That option would help the transit agency create another revenue stream, McNeil says.

"We haven't really decided on one different way [the cards can be used outside of transit]," she says.

That option, however, may not be well-suited for a small system such as Allegheny County's,  "How many people in Pittsburgh use transit?" he asks rhetorically. (More than 69,000 commuters daily use the authority's three busways and 25-mile light-rail system, according to the agency's Web site.)

Quadango, who once served as the vice president for the Metropolitan Trans-portation Authority Card Co. in New York,says local merchants in large cities such as New York and London would find accepting closed-loop contactless transit cards more lucrative.

"That's a market," he says. "If you have a couple hundred thousand holding a card in [a smaller city], I don't know how much of a market that is."

Allegheny County also believes the new system will help combat fraudulent paper transit passes used with the current system. "With the advances in computer technology, it's very easy to create a fraudulent pass and use it on the system," McNeil says.

In May, the transit agency told its contractor, Scheidt & Bachmann USA Inc., to begin upgrading buses with new fare boxes. The authority, which also operates a 25-mile light rail system called the T, will conduct a pilot early next year involving company employees, transit-advisory members and possibly University of Pittsburgh students, the McNeil says.

Allegheny County gained some first-hand experience with smart card systems earlier this year when transit officials visited Atlanta, Boston and Washington, D.C., McNeil says. "They told us to keep it simple," she says. "A couple of them said they really over-designed their system." For example, the Washington Metropolitan Area Transit Authority introduced acceptance of its closed-loop system in phases, which confused some customers, McNeil says.

The Washington Metropolitan Area Transit Authority's main obstacle was changing consumer behavior, the transit agency noted in an e-mail message to ATM&Debit News. Introduced in 1999, SmarTrip was an option for riders to use instead of bus tokens and passes or rail fare cards. SmarTrip is the name of D.C.'s closed-loop system. Commuters still can use cash, bus tokens and passes, and paper rail farecards.

The authority encouraged riders to use the cards by staging sales events at Metro stations. "Selling the cards in stations was well-received by the public because they could ask Metro reps their questions about the new fare-payment option and how it would work," the authority writes.

Allegheny County is planning a similar strategy, McNeil says. The authority will use local media and send direct mailings to promote the new system.
"Once people see how easy it's going to be, they are really going to like this system," she says. ATM

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