NYC's MTA goes Open Loop

Next month, NYU will be hosting a panel to discuss what they call "Contactless smart cards for transit fare payment: A paradigm shift."

The paradigm shift refers not to the use of transit smart cards, which is commonplace, but to the acceptance of smart credit cards from Citibank and Mastercard. In their press release they write:

MTA New York City Transit is exploring an option that permits payment of fare at the point of entry using a standard, bank-issued contactless smart card device. This is a paradigm shift from traditional approaches to fare collection in which transit agencies issue fare media and tickets that are integral to a stand-alone, custom-designed fare collection system. Panelists will review this paradigm shift and explore some of its implications.

Since the beginning of this year, the MTA has begun installing smart card readers from OTI into NYC stations. Only a limited number of participants were selected to trial the pilot, so don't expect to be able to use your Blink just yet.

But judging from the fact that a number of panelists will be from the MTA NYC Transit, it appears that the trials have gone well and the MTA is poised to expand the rollout. In fact, this forum could well be part of their public education before a large scale public trial.

Though the technology inside a regular transit smart card and a contactless credit card is the same (ISO14443), the infrastructure supporting each is vastly different. That is what makes this project so significant. It's a big step to move from a closed-loop automatic fare collection system to an open loop, global credit card network.

The open loop credit card network offers a much wider scale of use for riders. If this idea takes off, riders could potentially use their credit cards to take public transport all over the state, country, or world.

Adopting contactless credit cards is a win-win situation for riders and the transit authorities. Rider have one less card to carry and not only enter the gates more quickly, but eliminate the time spent buying tickets.

For importantly, with a credit card there is no 'breakage' - where stored value is not used - because riders only pay for the rides they use. How many times have you bought a new card because you left your MetroCard at home.

Transit authorities normally benefit from 'breakage' because they do not refund money on lost cards, but they have to bear the operation costs of running the automatic fare collection systems and the clearinghouse functions with the money. With an open loop system such as the credit card network there is no such problem or risk. Let the professionals do the clearing.

Smart credit cards are ideal for this type of application. They were designed to facilitate quick, minipayments. There should be no concern about their safety in the transit system because human operators can't change the value deducted from the cards.

There will however be a concern about rider privacy. The amount of information that credit card companies have on their card carriers has already raised the hackles of privacy activists like Katherine Albrecht. Putting rider location information and transit patterns onto the open loop network could potentially be used to track the location of an individual much more closely than is possible with credit cards today.

This is an issue Citibank and Mastercard along with the MTA need to call out and address today, before a public rollout. It's not a deal breaker. For most people, the convenience is a worthwhile trade-off. Take for example our embrace of cellphones, which transmit much more accurate location data than RFID ever could.

Ultimately, the introduction of contactless credit cards as a form of payment for transport is a significant paradigm shift.

For more info on the trials read, Government Technology, The Subway with Ease
For info from Citi click, The NYC Subway Trial