New York Tries To Bring The Subway Fare Into The 21st Century

(Bloomberg) -
A representative from Visa demonstrates how a contactless card payment scanner installed at an MTA turnstile would work. (AP Photo/Mary Altaffer/File)

A trial program to replace the New York City MetroCard reached 1 million rides in just 2 1/2 months, the Metropolitan Transit Authority announced this week. But whether this latest effort to bring Gotham’s dysfunctional, 115-year-old underground into the 21st century can work system-wide is another matter entirely.

Modeled on payment technology used in London and Chicago, the $540 million OMNY system allows New York commuters to scan credit or debit cards (as well as smartphones and smartwatches) instead of using the ubiquitous yellow card. The frustration of swiping and reswiping as your train leaves the station will be a thing of the past. Or at least that’s the hope.

Beyond speeding humans through the city’s 472 subway stations, OMNY aims to integrate those millions of transactions into financial networks. But imposing a new form of fare payment on any urban transport system, let alone one with an annual ridership of 1.75 billion, can be a major undertaking. Al Putre, head of the MTA’s New Fare Payment Program, calls the endeavor a “heart transplant.” Things often go sideways.

That’s what happened in Chicago back in 2013. New fare readers were built to handle the city transit system’s new “Ventra” cards, credit cards with contactless capability, and smartphones and smartwatches using Apple Pay, Google Pay or Samsung Pay. But when the network came online, calamity was almost immediate. The scanners gave away 930,000 rides, double charged for others and occasionally picked up data from nearby cards belonging to other commuters.

The Chicago system, which has since been fixed, also failed to credit deposits to some rider accounts. More recently in Boston, the Massachusetts Bay Transportation Authority was forced to delay the unveiling of its new fare collection system thanks to technical difficulties with its $575 million revamp.

Similar efforts to integrate scanner technology are underway elsewhere. Beijing’s transit system already has a combination of contactless digital wallet scanning and QR code options and Hong Kong is planning a roll out of its own scanner system by 2020. In the U.S., Los Angeles is in the process of installing a new open payment system and Miami is starting a pilot program this summer. Transit systems in Atlanta, Washington and San Francisco are also considering a transition to contactless payments.

New York’s program, called One Metro New York or OMNY for short, is designed and run by the same contractor behind the Chicago and Boston projects. Cubic Corp., a San Diego-based transit and defense systems company, has hundreds of millions of dollars in contracts with nine of the 10 largest U.S. transit systems, according to Matt Cole, a Cubic senior vice president. Cubic’s transportation systems division is responsible for about 56% of the company’s $1.2 billion in 2018 revenue.

The company was behind the first use of magnetic stripe fare technology way back in 1977, in the Washington Metro. Seven years ago, Cubic was also first to integrate contactless payment cards, this time in London’s Underground. In 2018, there were about 17 million trips each week on the U.K. system using contactless payments, making up 45% of all journeys, according to a Mastercard case study.

With one of the oldest subway systems in the world, New York City has seen several different modes of payment through its history. In 1904, riders simply bought a ticket. That changed in 1920, when the Metropolitan Transportation Authority installed turnstiles that accepted nickels and later dimes. The switch to tokens was made in 1953 when the fare rose to 15 cents, since turnstiles couldn’t take two different coins.

Tokens were phased out almost 50 years later in favor of the MetroCard-which was first introduced in 1995 as part of a Cubic contract. In 2006, the MTA worked with MasterCard and Citibank to introduce PayPass, a contactless fare payment card, but the technology didn’t take. The transit authority tried again in 2010, relaunching PayPass with MasterCard, though it once again failed to gain adherents among commuters.

Cubic’s Cole contends OMNY will transform the way New York’s subway works-and gain traction among riders. “If you’re like me, it actually can be a 5-second transaction swiping it a few times,” he said of the MetroCard and its finicky magnetic strip. Moreover, the MTA claims the expense of maintaining the current system is significant, requiring the production of millions of cards and servicing vending machines and card readers that often break down.

The bet by the MTA and Cubic is that commuters are now more comfortable with contactless payment systems.

In 2017, the MTA awarded Cubic a $540 million base contract, starting with the pilot program on one of the busiest lines in the subway system. A portion of the Lexington Avenue 4, 5 and 6 lines between the Barclays Center in Brooklyn and Grand Central Station in Manhattan, as well as on buses originating in Staten Island, have Cubic’s neon blue scanners affixed to turnstiles and bus handrails.

The number of active users in the New York pilot program reached 196,000 as of July 30, according to the MTA (though some 4.3 million people use the system every day). Cole is confident that a slower rollout will result in a more successful debut than what befell Chicago. “The entire system was launched to the entire ridership all on day one essentially,” he said of that debacle. “We made some mistakes.”