Contactless Banking Payment Pilot at MTA New York City Transit

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1 Contactless Banking Payment Pilot at MTA New York City Transit Card Tech SecurTech May 2008 Steve Frazzini Program Director Paul Korczak Project Manager

2 Overview Business Strategy and New Payment Model for Transit Opportunities: why consider an alternative approach? Phase I Results Next Steps 2

3 Potential Business Strategy: Merchant Approach Participate as a merchant in the banking industry s move to contactless form factors (cards, cell phones, key fobs, etc.) Layer on a contactless bank device payment option for customers at the point of entry (fare gates, bus fare boxes) Coordinate with regional transit partners (PA, NJT, PATH, others) to solve the regional fare payment question: - Adopt a uniform payment approach - Speak with one voice as a merchant category 3

4 Business Model: Becoming a Merchant at the Point of Entry Today s Practice Fare Collection Selling tickets, Validating payment Future Fare Payment Accepting payments Full ownership of a custom-built ticketing system Greater participation in the banking payments network Defining the customer relationship from a transit perspective Adapting transit business needs to customers broader retail payments experience 4

5 Business Model: Support Functions Today s Practice Pilot Test Set Fare Policy and Pricing Transit Transit Control Data Transit Transit Manage Device Life Cycle Transit Issuer Service Customer Accounts Transit Issuer/Service Provider Address Customer Claims Transit Issuer (payment, billing) Transit or Service Provider (usage issues) Customers (self-directed) Process Payment and Usage Transactions Transit Transit or Service Provider Merchant Acquirer Risk Management/Security/ Enforcement System Upgrades/Technology Development Transit All Business Partners 5

6 Business Model: Operating Framework - SunPass for Transit Customers experience when paying Tap a contactless banking device of their choice. Simple yes/no acceptance message at fare gate. No receipt issued. Back office Supports shopping for fare products via website or over the phone. Applies fare policy rules, processes credit/debit payments. Provides account-based usage and payment details via web and staffed customer service center (CSC). Automatic payment of transit account an option. Transaction aggregation used to minimize processing costs paid by transit for Pay-As-U-Go. 6

7 Pre- Paid Business Model: Purchase Options Buy fare products on-line or via CSC. Phase II: all fare products available; use any contactless bank-issued device. Access usage/ payment details on-line or via CSC. Pay-As-You-Go Tap like paying at any merchant. $2.00 base fare. Register on-line to see usage/payment details. 7

8 Business Model: Back Office Payment Device/ Pilot Reader NYCT NYCT Internal Comms and Back Office Service Provider Standard Merchant Processing Network Read only. Real-time auth (Phase II). Data captured by NYCT when presented to payment platform. Checks and balances performed by NYCT. NYCT has final word on financial reporting and customer service issues. Applies fare rules/processes usage and payments. Supports website, CSC; monitors system performance. Dispatches maintenance crews. Processes banks payments. Supports customer on payment/billing issues only. Risk management. 8

9 Business Opportunities: Improved Customer Service Elimination of steps no stopping to buy tickets. Familiar to customers--less of a learning curve, fewer trust issues It s paying with your bank card More flexible--customers choose banking relationship and payment form factor (i.e., card, FOB, cell phone, etc.). Self-directed customer support via web and staffed CSC. Overnight problem resolution via electronic funds transfers. Greater security: customer protected by extensive resources and zero liability policies. 9

10 Business Opportunities : Future Proof the fare payment system Reduce infrastructure investments, limiting exposure to potential issues of early obsolescence Fewer pieces of specialized equipment Simpler, decentralized infrastructure Share cost of core technical upgrades and business process advances with broad range of stakeholders. Tap into open market for equipment and services. Concentrate functionality and major investment in a central back-office. 10

11 Business Opportunities : Finances Reduced operating costs Fewer business functions need specialized transit handling. More support offered through banking network partnerships. Broad-based competition for equipment and services because of open standards. Scaled-back investment in transit-owned infrastructure Less field equipment needed to support same transactions. Less future-proofing required. Potential revenue increases due to convenience factor. 11

12 Phase I Outcomes: Operations Customer Claims Equipment Processing Payment claims rate identical to merchant experience at vending machines Indications are that fraud risk is lower Usage (acceptance) issues at point of entry significantly lower Sales transaction availability very high Very easy to install plug and play Verified read of <300ms; accuracy of read 100% Highly reliable/stable significantly less maintenance complexity and frequency No vandalism All usage and sales transactions fully reconciled no accounting issues identical to broader experience Banking infrastructure extremely robust: fast/accurate/reliable 12

13 Outcomes: Customer Support Customer Service Center/ Web Site Users very satisfied with approach and level of service Customers first view problem resolution as a generic payment issue resolved through their banking relationship Claims profile mirrors EZPass tolling experience - Of 3,500 inquiries, most were information requests - Second highest category were transfers to the bank - Fewer than 200 claims inquiries: all handled as part of financial back office - Only one (1) call transferred to NYCT Web site 100% available: very active, with over 238K page views and more than 50K unique visitors 13

14 Myths Debunked Transit fare policy is too complex to be programmed and managed by the financial services sector. Transit agencies will lose float and/or expired card value. A banking approach costs more than current systems. Customers do not use debit/credit. Accepting bank cards will be an added cost for transit; interchange will increase dramatically. Transit will not have access to the same data as with a traditional AFC system. Bank cards are less secure; privacy is a concern. 14

15 Next Step: Phase II Scope Fare Options Acceptance Customer Support Phase I-Subways 30 Stations, 79 FCAs (mostly Lex Line) Pay-As-You-Go ($2.00) Prepaid: Value Based, with 20% bonus Citi-issued MasterCard PayPass only All form factors (card, cell phone, key fob, etc.) Web, pilot Customer Service Center (CSC) Phase II Buses and Subways Equip up to 275 buses (recommended routes on following pages); real-time authorization (on subways, via SONET; on buses, wireless EDVO) Pay-As-You-Go ($2.00) Pre-Paid: all fare products passes, transfers, reduced fares, and value-based with 15% bonus, possible pilot of transit benefits program All issuing banks, brands, and all form factors (Amex, MC, Visa, etc.) All form factors from all issuers Web, pilot CSC expanded for all payment brands; Link to regional pilot at PA/NJT/PATH in

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