Consumers' preference for using cards instead of cash is prompting transit authorities nationwide to install fare systems that accept contactless payment cards.
Several officials say they prefer contactless to traditional, magnetic-stripe readers because the technology offers faster transaction processing when people board buses and enter train systems.
The Allegheny County Transit Authority, in Pennsylvania, is planning to introduce a proprietary, closed-loop system by the end of 2010, according to authority spokeswoman Judi McNeil. "People in general are so used to using credit and debit cards now, it's going to be a seamless transition," she said.
Allegheny County, which includes Pittsburgh, will join such cities as Chicago and Washington in offering commuters a closed-loop transit card. All three cities are also exploring the option of letting commuters pay transit fares using bank-issued contactless credit and debit cards.
Some agencies, including Bay Area Rapid Transit in San Francisco, are testing mobile-phone payment systems, using near-field communication technology within the handset that can transmit transaction data to readers and receive information such as coupons. However, observers said that phones with NFC components will not be widely available for at least a year and possible longer.
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 their fares.
New York has been testing acceptance of open-loop contactless cards since 2006 with Citigroup Inc.; the New York Metropolitan Transportation Authority recently concluded the first phase of that test. In a letter sent last month to trial participants, Citi said it switched off the system in May in preparation for the test's second phase. The letter did not say when the second phase will begin.
Washington's Metropolitan Area Transit Authority is considering the use of open-loop contactless cards. In May the authority's finance committee announced plans to solicit proposals to develop other contactless payment technology besides closed-loop cards, including bank-issued cards.
The agency expects to review proposals this summer, though it has set no deadline for adopting a new fare system.
The Chicago Transit Authority is also considering the use of open-loop contactless cards.
The major card companies are closely monitoring the various initiatives, said Peter Quadagno, the founder of the West Chester, Pa., card technology consulting firm Quadagno & Associates.
"Visa and MasterCard have been hovering around transit for a long time now," he said.
Both card companies are testing open-loop transit payment systems, MasterCard Inc. in New York and Visa Inc. in Los Angeles, he said. The larger transit systems "are moving to a model that may result in bank-issued cards becoming the vehicle of choice."
Allegheny County is exploring potential partnerships that would let local merchants accept its card as payment for goods and services, a scheme similar to the Octopus card in Hong Kong. This option would help the transit agency create another revenue stream, said McNeil, its spokeswoman.
However, this option may not be well-suited for a small system such as Allegheny County's, Quadagno said. Local merchants in large cities such as New York and London would probably be more interested in accepting closed-loop contactless transit cards than in a smaller place such as Allegheny County.
"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," he said. "How many people in Pittsburgh use transit?" (More than 69,000 daily commuters use the authority's three bus lines and 25-mile light-rail system, according to the agency's Web site.)
Allegheny County also believes a new system could help combat the fraudulent paper transit passes that are often 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 said.
In May the transit agency told its contractor, Scheidt & Bachmann USA Inc., to begin upgrading buses' fare boxes. The authority, whose light-rail system is called the T, is to do a pilot test early next year involving company employees, transit advisory members and possibly University of Pittsburgh students, McNeil said.
The county gained some first-hand experience with smart card systems this year when transit officials visited Atlanta, Boston and Washington, McNeil said. "They told us to keep it simple," she said. "A couple of them said they really over-designed their system." For example, the Washington transit authority introduced acceptance of its closed-loop system in phases, which confused some customers, she said.
Its main difficulty was changing consumer behavior, a transit authority representative wrote in an e-mail message. The agency has introduced its SmarTrip fare card system, though commuters still can use cash, bus tokens and passes and paper rail fare cards.
The authority has encouraged riders to use the cards by staging sales events at Metro stations.
Allegheny County is planning a similar strategy, McNeil said. 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 said.