MasterCard Inc. has developed a network-based payments system that enables any contactless credit or debit card to function as a fare card usable on several public transit systems.

The Purchase, N.Y., payments company has been pilot testing a contactless payment system since 2006 in New York with cards issued by Citigroup Inc., but the next big test will take place in early 2009 when it expands the program to other issuers, card brands, and transit organizations.

Stephen Orfei, MasterCard's senior vice president of advanced payments, said the key to making standard contactless payment cards viable for transit systems was developing a speedy approval format.

"For the first time, technology allows us to come into this industry," he said.

And making a bank-issued card into a transit card can do more for an issuer than just bring in revenue for fare purchases, he said. "It's nice to be in a quick-service restaurant … , but transit is the application that brings everybody to the table. The card that brings you to and from work will be the card that's top of wallet."

This is exactly the trend that Citi observed in New York after the Metropolitan Transportation Authority began accepting its MasterCard PayPass cards on one subway line two years ago.

Muge Yuzuak, Citi's global transit venture head, said that, for many commuters, Citi's cards have become "top of wallet, and we have seen more usage on the card and we have seen more loyalty" than before. Though she would not give exact transaction volumes, Ms. Yuzuak said, "there was an overall increase in the usage."

Commuters on New York's Lexington Avenue line can tap Citi-issued PayPass cards or fobs onto a special reader built into the turnstile; within 300 milliseconds a green arrow lights up granting them access to the system.

The commuter's account is not charged at this point, Mr. Orfei said. Instead, a preliminary approval verifies that the card is legitimate, and a cardholder's first transaction will always be approved, even if their commuter account is not in good standing.

The account status is checked later, at which time the system gives the commuter temporary approval for all fare purchases until they are aggregated into a single transaction — either when their value reaches $15 or in two weeks' time, whichever comes first. At this point the account status is checked again, and if it is in good standing the commuter is given another approval, which lasts until the next aggregation, and the cycle repeats.

Mr. Orfei called this arrangement network-based because the account data resides on the network rather on the cards; the transactions run on the same network as other MasterCard purchases.

In contrast, transit systems in many cities, including New York, are card-based, storing prepaid fare purchases on the cards.

MasterCard has been offering since 2005 a card-based, contactless fare system in Kaohsiung, Taiwan, that to riders may appear similar to the one in New York. But the underlying technology is very different; it uses stored-value cards and the readers are not attached to a payments network.

Mr. Orfei said that MasterCard hopes to use its success in New York to prove the appeal of the network-based system to other cities worldwide. It has already signed agreements with New Jersey's NJ Transit and the Port Authority of New York and New Jersey.

The network-based approach proved immune this week to a systemwide problem that prevented all MetroCard vending machines from accepting card payments, according to Mr. Orfei. The MTA has not identified the source of that problem, but it did not affect the PayPass-enabled turnstiles.

Mr. Orfei said that, even if the payments network were to go down, commuters could still use PayPass cards to ride the trains.

The MTA's vending machines and turnstile contactless readers are handled by the same processor, Chase Paymentech Solutions LLC.

The MTA plans to expand the trial in the first half of next year. Chase Paymentech will remain responsible for clearing and settlement, but MasterCard will begin handling authorizations.

All card brands and all issuers' contactless cards will work with the subway readers, and though there is no plan to install the readers on additional subway lines, they will be added on 275 MTA buses and 104 NJ Transit buses, as well as at turnstiles on the Port Authority of New York and New Jersey's ferries, PATH train, and AirTrain systems.

The readers on the MTA subway line will also begin offering new fare options (such as an unlimited-ride monthly pass) and they will allow free transfers from the bus system.

Commuters will be able to manage their fare options through a Web site that MasterCard will manage but which will not have overt MasterCard branding.

Citi's Ms. Yuzuak said that, as the system is opened up to other issuers, her company will have a head start. "We would like to use that upper hand, so to speak, to move on and get on with the pilot" test in its next phase, she said.

Steve Frazzini, the MTA's chief officer of MetroCard operations, said that if these tests go well the MTA might be able to "get out of the ticketing business" altogether and simply accept payments for individual transactions.

Dennis Moroney, a research director in the bank cards practice at TowerGroup, an independent research firm owned by MasterCard, said that transit systems "want to be a merchant," not managing a payment system.

MasterCard has found an ideal use for aggregation, a system that is "high-volume, small amount, with a minimal amount of risk," he said. Mr. Moroney agreed that people who use their bank card for subway fares will use the same card for other day-to-day transactions. "We're all creatures of habit," he said.

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