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Visa Inc. s developing a product it hopes will appeal to the unbanked: a dual-purpose contactless payment card that combines a prepaid general-purpose account with a separate account dedicated to transit payments.
The San Francisco payment card company said last week that it is planning a 12-month trial of a transit and open-loop, multifunction card in conjunction with the Los Angeles County Metropolitan Transit Authority.
W.A. "Sandy" Thaw, a senior business leader in Visa's global product innovation group, said its other partner in the trial, the kiosk operator Ready Credit Corp., could issue up to 10,000 Visa cards to LA Metro riders.
The two payment functions are a good fit because the underbanked market likely has considerable overlap with public transportation riders, especially in a car-oriented market such as Los Angeles, Mr. Thaw said.
Tim J. Walsh, Ready Credit's president and chief executive, said other transit trials, such as one beginning next year in New York and New Jersey, use contactless credit or debit cards rather than dedicated fare cards to unlock turnstiles.
"Our approach is different because it has the transit application as well as Visa payWave on a single card. And it's a prepaid card," he said. "You don't have to be creditworthy to get the card."
Jennifer Tescher, the director of the Center for Financial Services Innovation, said a number of transit authorities around the country are exploring similar efforts.
"The notion that public transportation could be a solid distribution channel for reaching the unbanked is a really smart idea," said Ms. Tescher, whose organization, a nonprofit affiliate of Chicago's ShoreBank Corp., offers programs to assist financial companies to understand and serve underbanked consumers.
In a trial in Chicago, the transit authority is supporting automated fare top-ups of prepaid cards, which typically provide a fare discount and is a valuable benefit to riders, Ms. Tescher said. "The people who are the biggest users of public transportation are unable to take advantage of the fare break."
Mr. Walsh said his company's ReadyCard will be accepted for train, subway, and bus rides, just like LA Metro's existing contactless fare card, known as Tap, and for general purchases anywhere Visa is accepted. (The card will include a magnetic stripe and a contactless payment chip.)
Ready Credit plans to install at least 20 ReadyStation kiosks in or near transit stations around Los Angeles County by the time the trial begins in the second quarter to dispense the cards, he said.
Those basic "ride, pay, and reload cards" will let riders load up to $500 at the kiosks.
As long as the rider uses the card only for transit, no prepaid card fees apply, Mr. Walsh said. But for riders who use the card outside the transit system, such as making a purchase at a merchant, ReadyCard fees kick in.
The transit Tap account can be managed separately from the open-loop payWave account, so that riders can qualify for fare discounts, he said.
However, the companies see greater opportunity in a higher-value personalized card, described by Visa as "ride, pay, reload and ATM cash access cards," which will be embossed with the cardholder's name and account number and carry a $10,000 limit.
Mr. Thaw said consumers would have to show valid identification to obtain personalized cards.
That card would enable the transit rider to provide a card serial number to an employer, who could then load value to that card for direct deposit, Mr. Thaw said. "It's not their Visa card number," he emphasized.
Unlike most prepaid payroll cards in use today, this one will be controlled by the employee rather than the employer, making the card a portable credential that workers could continue to use even if they change jobs, Mr. Thaw said.
"They are now able to engage in the broader electronic payment environment that the rest of us take for granted," Mr. Thaw said. "Combining these products adds a lot of value" for transit riders.
Different transit systems have a variety of legacy payment systems in place, but LA Metro presented an attractive opportunity for Visa, he said.
"They already have an existing contactless infrastructure," Mr. Thaw said. "We're putting out a more sophisticated card that will work within the existing acceptance infrastructure."
Jane Matsumoto, the deputy executive officer of LA Metro's Tap contactless program, said the Visa program fit within the agency's existing contactless fare system, and could help the underbanked.
"This one card, for an unbanked rider, could introduce them to conveniences that up till now that would have been unavailable to them," Ms. Matsumoto said.
Evolving technology also offers transit agencies a greater opportunity to capture business from casual riders, who may not carry dedicated tokens or fare cards for the different transit systems but who might use a general purpose card for the occasional ride.
The 2009 trial in the New York and New Jersey area will include the New York City Metropolitan Transit Authority, New Jersey Transit, and the Port Authority of New York and New Jersey's Path system, Mr. Thaw said. "Interagency interoperability is ultimately going to be the driver."
Ready Credit, of Minneapolis, is among a variety of entrepreneurs taking advantage of alternative payment strategies to attract the underbanked.
In January the company announced an alliance with Fiserv Inc. to provide bill-payment capabilities through its kiosks by connecting with the CheckFreePay network, which is used primarily for walk-in bill payment.
Mr. Walsh said that after the Los Angeles deployment, his company will have just over 100 ReadyStation kiosks in 10 states, mostly in conjunction with retailers such as Macy's Inc., Best Buy Co. Inc., and the Cub Foods grocery chain owned by SuperValu Inc.
Bill payment has been well received and "Ready Credit believes the whole transit industry is an opportunity," he said.
