Contactless Banking Payment Pilot Contactless Banking Payment Pilot at MTA New York City Transitat MTA New York City TransitA fare payment option for the near future

UPDATE for the SCA Transportation CouncilUPDATE for the SCA Transportation Council

Steve FrazziniSteve FrazziniProgram Director Paul KorczakPaul Korczak

Project ManagerProgram Director Project Manager

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Overview

Guiding Principles for Future Fare Payment

Why the MTA Should Consider A Banking Payments Approach

Opportunities to:

1. Improve customer service and image of the MTA

2. Increase ridership and promote regional use of public transportation

3. Lower operating costs and increase revenue

Pilot Results

Next Steps

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Guiding Principles for Future Fare PaymentIMPROVE CUSTOMER SERVICE

Build on customer preferences, trends and broad-based consumer experienceMake tangible improvements over what customers currently experience

Key Requirements:Assure customers’ ability to purchase all fare options at willAccount-based business and operating modelTangible simplification: remove “steps” from payment experience in system

SOLVE THE REGIONAL FARE PAYMENT QUESTION“How does Transit provide a regional fare payment solution without 1) making the experience of fare payment more complex for the customer, 2) restricting customer choices, and 3) without imposing significant new resource requirements on transit?”

Key Requirements:Use one, easily understood approach to payment (not necessarily one “universal” instrument)Assure all fare purchase choices remain available to the customer and “pricing” remains purview of agency policy makers

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Guiding Principles for Future Fare PaymentREDUCE OPERATING COSTS/MINIMIZE NEED FOR CAPITAL INVESTMENT

Meet or beat the cost of current, available business models for purchase and payment of fares

Key Requirements:Introduce proven “open, market-driven” business and technical solutionsAvoid investing in custom-built solutions or options that have no fully-developed, tested cost basis

Major Consideration:“Host-based” systems (e.g., EZPass and banking payments) with “passive, read-only” use of payment devices are most cost-effective without sacrificing data, security, or customer service requirements

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Why Consider Banking Payments?

Customers favor electronic payments when buying MetroCards and when making other purchases*

MTA NYCT is well-positioned to consider alternatives to traditional transit smart card systems

Accepting traditional, custom-built, transit-owned smart cards requires a costly, long-term and major upgrade to the MetroCard system.

Banking payments has emerged as a viable business and economic option for transit

* MetroCard 2005 Customer Awareness, Attitude and Usage Tracking Study: New York Residents, April 2005, pp. 80-81. Survey of Consumer Finance, 2006 update, published by the Philadelphia Federal Reserve Bank.

** Single-ride tickets dispensed by vending machines.

60% of sales revenue at vending machines are paid with debit/credit

40% of MetroCard (non-SRT) **transactions are debit/credit

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Potential Benefits

Improve customer service and image of the MTA

Increase ridership on MTA services and promote regional use of public transportation

Lower operating costs

Increase revenue

Minimize MTA capital investment in fare collection systems

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A New Business Model: Agency Operations

BankAgencyRisk Management/Security/ Enforcement

BankAgencyProcess Transactions

Bank (payment, billing)

Agency (usage issues at point of entry only)

AgencyAddress Customer Claims

BankAgencyManage Customer Accounts

BankAgencyReplace Lost Payment Devices

AgencyAgencyManage Data needed for transit planning/financial reporting

AgencyAgencySet Prices and Pricing Policy

Pilot Test of NYC Transit PATH/NJT

Today’s Practice

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New Business Strategy for Fare Payment

Participate as a “merchant” in the banking industry’s move to contactless form factors (cards, cell phones, key fobs, etc.) and fare payment at the point of entry to the transit system.

Layer on an option for customers to pay with contactless bank devices of the choice (card, cell phone, key FOB) Reassess investment in MetroCard normal replacement

Develop an MTA-wide strategy for fare payment – “speak with one voice”

Coordinate with all agencies to understand operating and business requirementsDevelop MTA “value-proposition”Reflect strategy and value proposition when seeking equipment and services

Coordinate with regional transit partners (PA, NJT, PATH, others) to solve the regional fare payment question

Immediate Next Steps

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PART B: MTA NYCT Contactless PilotPART B: MTA NYCT Contactless Pilot

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Pilot Overview

The first phase of the pilot includes 79 fare control areas at 30 stations, most of which are on the Lexington Avenue line. The pilot is being executed at no cost to MTA NYCT as a joint effort with MasterCard and Citi

Because 80% of in-system MetroCard purchases are value-based cards, the first test of the ability to process fare policy introduced a value-based, Pay-As-U Go $2.00 flat fare and 20% bonus fares in line with current fare policy. (Transfers, time-based fares, and reduced fares are planned for Phase II)

Customer support, payment processing, and maintenance of pilot equipment is being provided by MasterCard. A dedicated Customer Service Center and specialized web site (www.mastercard.com/subwaytrial) was provided

AFC Program Management/MetroCard Sales is providing overall project management, business and operating support, financial reporting to the Controller’s Office, and risk management efforts in coordination with MasterCard and Citi

With input from Law, Controller, MTA Audit, Procurement, AFC Program Management/MetroCard Sales managed the development of business requirements for all phases of the pilot. NYCT’s AFC Maintenance division provided supervised turnstile access on an as-needed basis. NYCT Telecommunications provided coordination and support for Verizon phone services

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Results of Operations: Key Performance Indicators

“Tap” performance far better than expected<1.0 (PayPass terminal/device only)

Usage Issues per 10,000 rides

Handled by issuing bank; claims rate is better than that for standard fare media11.8 *

Sales/Billing inquiries per 10K transactions

No inconvenience to customers when entering subways99%+ (Back-office processor)

Sales Availability

Pilot(Shared Responsibility)

PERFORMANCE INDICATOR

* Only one-third of inquiries had impact on NYCT

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Results: Payment Platform

Customer inquires to call center confirm observations in focus groups –customers view a problem entering the system as a banking problem (not a transit problem)Loss exposure is potentially much less for the MTA as a “merchant” accepting a banking payment device: no fraud liability for Pay-As-You-Go per CAT 3 rulesPotential increase in float due to strong acceptance of pre-paid option No errors in processing sales transactions through banking payments system – 100% reconciliation – payment on-time (no float loss)Verified read of 300ms or less when device enters operating field; accuracy of read functionality tested in laboratory by technical teamNo “misreads” – each claim investigated; verified by comparison to turnstile registersAll taps (usages) reconciled

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Lessons Learned: Customer Service Center

Riders are satisfied with service provided by Customer Service Center

Customers view problem resolution as a generic “payment” issue to be resolved through their banking relationship

1. Most calls were information requests; second largest category was calls transferred to Citi

2. Only one call was transferred to NYCT Customer Service for resolution; confirms observations from focus groups that “fare payment” with a banking instrument is not perceived to be a NYCT issue

Profile of customer inquiries mirror current profile of EZ Pass – majority are “account management” issues; few issues with “usage”

The website has been very active, with over 238,000 page views and 50,000 unique visitors

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Customer Research SummaryCustomer Research Summary

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3 Phases of Research for AssessingMTA PayPass Citi Pilot

QUALITATIVE AMONG PAYPASS MTA USERS AND NON-USERS

Nov, 2006

ATTITUDE AND USAGE RESEARCHNov-Dec, 2006

WEBSITE INTERCEPT SURVEYJuly- Sept, 2006

RESEARCH

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Conclusions & Implications: MTA PayPass Users

Citi Card members that had used PayPass on the subway were very favorable (2/3) about the experience, with most rating it positively and very few reacting negatively.

Both rational & emotional benefits associated with PayPass usage appear to motivate trial & continued usage.

The most motivating factors are having it automatically charged to own credit/debit cards, easy to use, and fast & convenient way to pay fares.

MTA PayPass users generated incremental subway ridership behavior at the pilot test stations, particularly Debit Cardmembers.

Most of those who had used PayPass were highly likely to continue to use it to pay for subway rides in the future, with the majority preferring PayPass over MetroCards.

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Conclusions & Implications: MTA PayPass Non-Users

Non-users were mostly deterred by rational reasons like insufficient train lines with PayPass and lack of fare options. They were also less likely to use the 4,5,6 line than users.

Many non-users are currently using other contactless methods of payment (e.g., EZPass), indicating that there is no inherent resistance to the technology.

Qualitative research suggests that non-users who tried it reacted positively and were likely to continue using if full roll-out is in place.

Website satisfactionOverall, Web Site Visitors were highly satisfied with the Web site, finding both the informational and transactional pages very useful.

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Conclusions & Implications: Roll-out

A full roll-out of PayPass at the MTA with expanded coverage and fare options will overcome most of current usage barriers.

Expand coverage – participants are riding multiple lines and buses throughout the city so being able to use PayPass in more locations would increase usage among users & non-users.

Offer unlimited monthly fare and other options –this was a major barrier for most so offering other additional purchase options will appeal to the more frequent rider. Participants saythey would not expect a monthly fare to exceed the current $76 they pay now for a monthly MetroCard.

Inclusion of Employer-paid programs (i.e. Transit Check) will also overcome usage resistance among non-users.

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Conclusions & Implications: Other ImprovementsTurnstile Functionality

Consider turnstile usability – some suggest that the placement of the contactless reader on the turnstile might be better positioned on top of the turnstile.

Consider showing balance on turnstile –several participants suggest that being able to see their card balance when they tap their card/ tag would be helpful especially if they choose not to use the automatic re-load feature – “I would need to know my balance so I can add more money if needed.”

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Next Steps: Bus Pilot

Reader for wireless cell phone technology is ready (same as that active now on 1,600 taxis in Philadelphia and planned for 300 taxis in NYC)

Preliminary operational review has begun (in cooperation with DoB)

Preliminary review of route options and fleet size: crosstown route(s) at a minimum

Complete design/testing of full banking payment solution at no cost to MTA

• Stress test system with a larger number of participants

• May allow test of regional fare payment

Possibility to introduce a pre-paid card solution (kiosks) along selected routes

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Update: Regional Fare Collection

Ongoing collaboration with PA/PATH/NJT on RFP for banking payments pilot on PATH and NJT (with option of connection to MTA-NYCT pilot)

RFP issued

Implementation target: 3rd Quarter 2007

Equip one turnstile in all 13 PATH stations

Equip selected NJT bus routes (zone-based and flat fare)

Option for MTA NYCT to participate with PA/PATH/NJT to create a regional banking payment pilot