Three New York transit agencies are kicking off a contactless payment test today that they hope will show credit and debit cards can replace closed-loop fare cards — and lead to wider use of contactless cards in general.

An earlier test used only MasterCard Inc. cards issued by Citigroup Inc., but this phase expands that to include other issuers and card brands. Observers said the program could spur the use of contactless cards for other purchases and encourage other cities to consider the payments technology for their transit systems.

MasterCard, which developed the contactless fare technology, said this could be the last evaluation before New York transit agencies decide to accept bank cards throughout the entire system.

"After this phase, our hope is that … we're able to move into a full launch and have it be the case that there is no longer a MetroCard," said Joshua Peirez, MasterCard's chief innovation officer. New York's ubiquitous orange fare cards could end up "in the museum, up next to the tokens."

New York's Metropolitan Transportation Authority agrees — it's not a question of if, but when, bank-issued contactless cards will replace its MetroCard. "Our chairman's vision is that this becomes an MTA-wide fare-pay system," said Amy Linden, the MTA's senior director of new fare payment systems.

Beth Robertson, the director of payments research for Javelin Strategy and Research in Pleasanton, Calif., said "Transit is a great application" for contactless because it "can really facilitate the process and it can be so convenient."

And "as people become familiar using that payment device in a transit application, then they're more comfortable using it in other applications as well," Robertson said.

Beginning today, contactless credit and debit cards can be used to pay fares on some buses and trains operated by the three main New York transit systems, including most of the Port Authority of New York & New Jersey's PATH train stations and three NJ Transit bus lines. It also adds some MTA bus lines and revives acceptance for the MTA's Lexington Ave. subway line that was the focus of the first test.

The test is expected to run for six months. Riders can now use any issuers' MasterCard cards, and in two months they will be able to use any contactless Visa Inc. cards as well. (MasterCard gets a two-month exclusive arrangement because it is a major player in the project; Visa was invited to join because the participants recognize that accepting more cards would make the system more useful to riders.)

The MTA's vision is to become just like any merchant, Linden said, accepting bank-issued cards rather than having to manage its own closed-loop system. Eventually the MTA wants to be able to hand off the expense of managing a payments system. In particular, customer service issues related to payments would be handled by the issuers and not by the MTA, Linden said.

The current test is not meant to determine whether the MTA can replace its MetroCard, but whether MasterCard's system meets its needs.

"We will move forward," Linden said. "That doesn't mean we have all the answers to how we deploy it."

The benefits to the MTA would be substantial, particularly for its more than 6,000 buses, she said. Today, buses accept MetroCard payments without any kind of wireless hookup to the agency's payment system, so the transaction logs don't get downloaded until the buses come in for maintenance at the end of the day. Downloading this data is extremely time-consuming, she said; it sometimes takes longer than all the other maintenance tasks for a bus needs.

The new payment system would eliminate this process because transaction data will be uploaded wirelessly throughout the day.

The agencies are keen to introduce the fare system on buses because it could let passengers board faster. Unlike subway stations, buses have only one payment point. If riders can pay their fare on the spot with their bank cards, rather than purchasing a MetroCard elsewhere or digging through their wallets for cash, the boarding process — and thus the entire bus system — will move faster.

"We're different than most merchants," Linden said. "We need speed to expedite passenger flow on the buses." She stressed that cash would still be accepted, since the MTA cannot adopt a system that would exclude the unbanked. The new system would also accept prepaid contactless cards.

Expanding acceptance to the subways would require a significant overhaul, because it would involve connecting more stations to the payments network.

The Port Authority and NJ Transit did not return calls last week requesting comment for this story.

Peirez said the benefit of focusing on New York is that it has a higher adoption rate of contactless cards among consumers and merchants than most other cities, particularly because major contactless issuers like Citi and JPMorgan Chase & Co. have a strong presence in the city.

Many New York residents already use contactless cards "when they ride taxis [and] when they go to the drug store," he said.

One thing MasterCard aims to prove is that bank-issued cards can handle more complex fare types than the transit agencies currently offer.

"Ultimately if you want to be able to replace a closed-loop system with an open system, your platform has to be able to handle all of the different fares that an agency wants to offer," Peirez said.

For example, today an unlimited-ride MetroCard cannot be used to pay for multiple people at once; riders who want to pay for additional people would have to buy a separate MetroCard. Under the MasterCard system, a customer who has purchased an unlimited-ride fare would be able to tap the same card again to charge extra fares to their account.

"When you have an unlimited card, the current system is 'dumb' in the sense that it just knows that it's an unlimited-ride card," Peirez said. "It can't also say, 'OK, now I'll bill you for individual rides.' It can't handle both types on the product, whereas we can."

People can pay as they go without enrolling their card, or purchase unlimited-ride fares online and link the account to a specific contactless card; however, they will only be able to use it on lines that are involved in the current test.

Linden of the MTA said bank cards can handle all other fare types the transit authority offers, as well as transfers among the vehicles participating in the trial.

Ultimately the agency still needs to address acceptance on rail lines, where conductors still collect paper tickets, as well as test transfers between buses and rail.

The MTA may even be able to retroactively adjust a rider's fare purchase to offer the fairest price. For example, someone who bought an unlimited-ride card for one day but only used it once potentially could be refunded the difference.

"MetroCard was very good in its time, it's still good, and it gave our customers choices that they didn't have before," Linden said.

"But now we're talking about more choices … on an open payment-bank standard type card, it's unlimited what you can do."