Chase Manhattan Corp. is negotiating with the Metropolitan Transportation Authority of New York to expand the purchasing power of the city's transit fare card.

If the plan comes together, Chase could help propel New York - and perhaps the country - down the "electronic purse" route, automating millions of small transactions that historically lent themselves to coin and currency.

Since its introduction a year ago, the MTA's MetroCard has been restricted to subways and buses. As a multipurpose electronic purse, it would be usable at a variety of machines and merchant locations - a concept that has made the most headway in parts of Europe and Asia.

While several U.S. tests are getting under way, including Visa International's potentially sizable smart card system associated with the 1996 Olympics in Atlanta, few can approach the potential of the New York MTA, with its five million daily riders.

The agency wants the MetroCard to be accepted at newspaper kiosks, vending machines, public phones, and other suitable locations.

Chase has gotten on the inside track to operate the payment system. A spokeswoman for the bank, which would be the largest in the country after its pending merger with Chemical Banking Corp., confirmed that it "is in discussions to develop a stored value card."

Because final contracts have not been signed, the transit agency is saying only that it is negotiating with one party. Tito Davila, an MTA spokesman, said details of the partnership will be disclosed in February.

Mr. Davila said the MTA has long wanted to explore additional electronic-purse applications. He pointed out that in 1993 the agency issued 22 requests for proposals to potential vendors.

Chase and the MTA are reportedly down to negotiating details such as interchange fees, an implementation schedule, and whether to adopt chip card technology or stick with the standard magnetic stripe approach.

The first-generation, magnetically encoded MetroCards are accepted at electronic turnstiles in 150 of the 468 subway stations and on all 3,600 city buses.

The public acceptance rate of 6% to 7% has disappointed agency officials, who expect popularity to soar when the entire subway system is on-line next year.

The nation's largest public transit system is seen as fertile ground for a stored value program, with the potential for significant income for a transaction processor.

Mr. Davila said the principal purpose of the MetroCard is to encourage and improve ridership. But the MTA hopes the added convenience and functions will make the MetroCard "very profitable" for the agency and its private-sector partners.

Cards currently can be purchased at subway booths in $5 increments up to $80. Balances are reduced by $1.50 per ride. Prepackaged $15 cards also are available from 1,200 local merchants, who take 2% sales commissions.

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