NY subway contactless roll-out sparks “gradual revolution” for US market

The New York’s Metropolitan Transport Authority (MTA) plan to retire the MetroCard in 2019 and replace it with an open contactless system will pave the way for gradual contactless adoption across the US for merchants, issuers and consumers, according to Allen Friedman, vice president  of payment solutions at Ingenico, a provider of seamless payment infrastructure.

Transport for London (TfL), the UK capital’s public transport organisation, embraced  contactless tap-and-go in 2012 and has since been heralded a “new wave revolution”for the  country’s payments network. TfL as well as Cubic Transport Systems are providing technological and manufacturing services respectively to MTA.

“As cities become smarter and more reliant on public transport,” said TfL chief technology officer, Shashi Verma in a statement, “technology like this provides customers with a simple and convenient way of paying the right fare at the right time, without the need to purchase a ticket. This contactless ticketing system is helping commuters all around the world and it’s great that New Yorkers will benefit from the technology.”

In 2017, 40% of all London tube journeys were made through contactless payments, up from 25% in 2016 according to TfL statistics. That figure has now risen to 50% with 25 major stations seeing a 60% usage rate. That equates to 50 contactless cards touching in per minute from Oxford Circus every week from half a million contactless journeys.

Across the UK in general, it is a similar picture, according to the latest figures from the UK Cards Association. With an average transaction of £9.40, the use of contactless has increased by 147.6% from 2016 to 2017 with an increase of 121.9% in contactless transactions in the same time period.

“Implementation of contactless is going to be a game changer,” says Ingenico’s Friedman. “The introduction of contactless in transit in major metropolitan areas is going to be the seeds to growing contactless usage across the country. That may take a while to spread to areas that don’t have mass transit,” he says.

But Friedman believes the true impetus will come from early adoption and production of Near Field Communication (NFC) ready contactless cards, rather than from merchants who are already contactless enabled.

“Once those dual interface contactless cards are in circulation, it will generate a lot more usage in other verticals,” says Friedman. “Some 70% of card terminals are capable of accepting contactless.”

A recent Paysafe report found that only 3% of US consumers used contactless cards once a month, compared to 54% in the UK.

“We’re seeing a lot of mass merchandisers moving to and implementing contactless,” says Friedman. “The card brands are making it easier to implement contactless. It’s not just the coffee places who want to reduce the people in line, it’s the grocery stores, the convenience stores. It’s also being more widely used in unattended places like vending machines and parking,” he says.

But ultimately for Friedman, the move by MTA could displace cash rather than chip and pin usage.

“For small businesses moving away from cash is preferential, but the main cost of doing business is accepting credit and debit cards.

“There’s the impetus to reduce cash handling and shrinkage cost – where a register may not balance out correctly – as well as an impetus to increase sales as people simply don’t carry as much cash as they use to. Often that comes with security reasons – there are parts of the city that use transit where it’s not advised to carry cash. We’re trending towards a less cash society,” says Friedman.

“We’re probably looking at 3-5 years for a big contactless change in the needle nationwide,” says Friedman.

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