Transit systems are a proving ground for payments: they require high-speed, sometimes wireless, and consistently reliable payments. New York’s subways, buses and taxis are constantly testing potential new systems, and not all succeed.

Two San Francisco-based payments providers, Square Inc. and Uber Technologies Inc., conducted separate testing for payment acceptance devices and systems in New York taxis the past few months. And both shut down those tests this week.

New York has a bit of a history in testing alternative payment methods for its transportation services, and ultimately ditching those plans.

Six years ago, the New Jersey Transit, the Metropolitan Transportation Authority and Port Authority tested a smartcard tap-and-go payment system, similar to the popular Oyster Card in the UK, in hopes of establishing a uniform payment method for all transportation in New York City.

Two years ago, those same transportation authorities again established a contactless payment test through MasterCard in hopes of eventually replacing the MetroCard commonly used by commuters. 

MasterCard confirmed that payment test did not result in a system taking hold in the market.

The six-month trial resulted in 17,000 customers entering MTA subways and buses using PayPass tap-and-go technology an estimated 74,000 times, according to a Fast Company website report earlier this year. However, those numbers represent only 0.24% of the systems’ daily ridership.

Regardless, the Fast Company report suggests that the MTA would like to have a contactless payment option in place by 2015.

In the recent examples of Square and Uber, details were murky as to why each provider suddenly pulled back. It appears certain that the New York Taxi and Limousine Commission’s regulations came into play and the agency wasn’t prepared to make changes in the taxi fleet’s point-of-sale devices or rider pickup methods.

Uber first expanded its service to cities beyond San Francisco in late 2011, stressing mobile scheduling and prepayment from iPhones or Android devices for private luxury cars and later for taxi services.

On his company blog, Uber CEO and co-founder Travis Kalanick said his company’s test in New York “was pretty exciting” because for the first time in 30 years New Yorkers could get a cab without going to the street to wave one down.

Kalanick said 160 New York City cab drivers participated in the tests, citing examples of a few who documented additional fares because of Uber’s system.

The taxi commission “put up obstacles and roadblocks in order to quash our effort around an e-hail for cabs, which they privately have said is legal under the rules,” Kalanick wrote.

“We’ll bite our tongues and keep our frustrations to ourselves,” he added.

Kalanick did slip in an optimistic tone, stating he hoped the commission “will get things moving and let UberTaxi back out” within the next year.

In the meantime, Uber continues to serve what Kalanick refers to as “innovation-friendly cities” on the east coast, including Boston and Toronto. New York continues to offer Uber service for luxury car scheduling.

Uber surely ran afoul of the commission’s regulations that prevent yellow cabs from scheduling pickups in advance because it is a service reserved for livery cabs, or black Lincoln Town cars.

The commission has also indicated that it is beginning to prepare a required phase-in of new vehicles for the cab fleet over the next three to four years. That program leads to some speculation that cab drivers and owners didn’t want to install new point of sale devices in cars they may have to replace soon.

In the meantime, Square had been testing an iPad-based system for processing payments in approximately 15 New York cabs. A New York Post report indicated Square sent a letter to the taxi commission citing its system was rendered “commercially unreasonable” because of new card-acceptance regulations the commission is currently drafting. The Post also reported that Square would reimburse pilot participants for the cost of taking out and reinstalling original systems from VeriFone or Creative Mobile Technologies. In an e-mailed statement to PaymentsSource, Square made it sound as if going back to the drawing board may ultimately pay off for the company in its pursuit of a place in the transportation payments market.

“We’re very grateful to the NYC Taxi and Limousine Commission for partnering with us on this pilot,” Square stated. “We’ve learned a ton about the specific needs of taxis over the course of more than 34,000 rides and 100,000 miles traveled.

“We’ll use our findings to further improve Square and make commerce and transportation even easier for millions of riders and drivers in New York and around the country,” Square added.

In the past, Square has made it clear it wants to be recognized as a Taxicab Passenger Enhancements Project vendor when cities around the country are seeking such a service.

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