The Utah Transit Authority, encouraged by early results from an ongoing test of contactless payments on the New York subway system, says it is planning to test the technology on its buses.
Craig Roberts, the authority's electronic fare collection manager, said Tuesday that though New York's Metropolitan Transportation Authority has not completed the test it began in January, it "has done very good work on their business case, and I think it's a very persuasive case."
Mr. Roberts spoke on a panel at the Micro and Small Payments Conference held in New York by the payments technology company Peppercoin Inc. of Waltham, Mass.
The Utah authority is installing contactless card readers on 40 buses for its ski bus routes. The readers will not accept standard magnetic-stripe cards. The test is to start Dec. 7 and run through April.
The New York test, though for a much larger system, is "very promising," Mr. Roberts said. "The indications are that this is not simply an experiment" that "will just go on the shelf," but an example to other transit systems of what is possible.
"Transit agencies are very risk-averse," he said. "They have to see it done somewhere before they are willing to try it."
Unlike the subway turnstiles where the MTA has installed contactless readers, he said, buses cannot be wired into a payment network, making it difficult to authorize payments in real time.
Transactions will either be submitted at the end of the day in batches or sent earlier by wireless transmission.
The Utah test will only include batch authorizations, Mr. Roberts said, which offers some advantages to bus riders. If riders are not charged until the end of the day, "we can figure out their transfers in the back office and only charge for the initial trip," he said. And for riders who make several trips a day and would benefit from buying an unlimited-ride day pass, the authority can charge only the day-pass price.
"That's very convenient for the occasional customer," Mr. Roberts said.
In New York, where some turnstiles can accept payments from Citigroup Inc.'s contactless MasterCards and fobs, Paul Korczak, the chief officer for MetroCard sales, said, "the current trial has been very successful," gaining "better-than-expected participation." A popular feature is the ability to reload fare cards online.
Greg Garback, the executive officer of the finance department at the Washington Metropolitan Area Transit Authority, which is also testing contactless cards, said the key to introducing the technology is keeping it simple.
"In Washington, there are more registered vehicles than there are registered drivers," he said, and many people do not depend on public transit to the extent they do in New York. A complicated vending kiosk could impel a confused first-time rider not to return, he said.
Edward Kountz, a senior financial services analyst in the Jupiter Research division at Jupitermedia Corp. in Darien, Conn., said that contactless payment is a good match with public transit. Even if handling transactions in batches means a few fraudulent ones get through, it is unlikely that the losses would be enough to justify abandoning the projects the UTA and other transit agencies are starting, he said.
"E-turnstile jumping is a very different category of potential fraud than card skimming or entering a stolen card number into a Web site," he said.
Mr. Kountz did not attend the micropayments conference but published a report Tuesday predicting that contactless payments in the United States would grow from $500 million this year to $79 billion in 2010. He said he expects that 37 million contactless payment cards will be in use by the end of next year, up from an estimated 18.6 million on this Dec. 31.
Though he said that transit systems will not be huge drivers for adopting contactless payment, he added, "Transit is something that will be brought along by the uptake of contactless" in the next few years.
