New Visa Ventures Tap the Growing Transit Payments Market

Visa Inc. raised its profile in the growing transit payments market on Tuesday with announcements that it was backing mobile payments for New York City-area commuters and was the exclusive card network for new prepaid fare cards in Los Angeles.

Visa also said its payWave contactless card became usable Aug. 1 at contactless-accepting transit locations served by New York’s Metropolitan Transportation Authority, New Jersey Transit, and the Port Authority of New York and New Jersey, which operates PATH trains connecting Manhattan and the Garden State. Visa kept that quiet until now in order to make sure any operational issues were resolved, according to W.A. “Sandy” Thaw, senior business leader in Visa’s Global Product Innovation and Strategy group.

Transit acceptance in New York for payWave is owed largely to the fact that MasterCard Inc.’s exclusivity for its PayPass contactless card expired. Working with issuer Citigroup Inc., MasterCard in 2006 started a pilot program for contactless card acceptance along New York City’s Lexington Avenue subway line. Officials announced an expanded, multiagency pilot June 1 that is to continue through Nov. 30. It not only covers 28 stops on the Lexington line but also includes most PATH rail stations, several MTA bus lines in New York City, and some New Jersey Transit bus routes in Newark and northern New Jersey.

Visa wouldn’t say how many payWave cards its issuers have in the market, but they include debit, credit, prepaid, and the Visa TransitCheck QuickPay Card, a prepaid card that holds tax-advantaged funds for transit payments. The New York pilot will provide more outlets for all those cards, according to Thaw. “It’s increasing acceptance of cards that are out there, more places for existing cardholders to use the cards they have,” Thaw tells Digital Transactions News.

The mobile-phone aspect of the New York trial puts Visa at the intersection of a much-ballyhooed payments technology with little actual acceptance, mobile, and a growing merchant category for general-purpose card networks, transit. Visa is working with DeviceFidelity Inc. to put so-called In2Pay microSD contactless chips in Apple Inc.’s iPhone 3GS and 3G. The SD, or Secure Digital, memory cards have near-field communication capabilities (NFC) for transmitting data between the card and terminal (Digital Transactions News, Sept. 14). Visa was short on details Tuesday about the mobile aspect, such as how many phones would be equipped with SD cards. “The numbers are relatively small,” says Thaw, but he adds that, “the good part of the story is we have a way to enable the devices without necessarily having a full NFC rollout.”

Whereas Visa’s New York transit initiative focuses on acceptance, the Los Angeles effort is aimed at the issuing side, specifically giving consumers more reasons to use prepaid cards, according to Thaw. In an exclusive deal involving the Los Angeles County Metropolitan Transportation Authority, Visa, and prepaid card program manager Ready Credit Corp., Ready earlier this month began offering two versions of a Visa-branded reloadable prepaid card called the TAP ReadyCard that incorporate LA Metro’s TAP (Transit Access Pass) smart chip for tap-and-go fare payments.

The first version is sold at about 40 ReadyStation kiosks, two in large stations and the rest in retail locations along bus routes. It costs $9.95 but includes a transit day pass that sells for $6.00 on a standalone basis. Riders can add up to $500 in value at the kiosks. The second, sold online or over the phone, has a higher load limit, accepts direct deposits and lets the customer get a PIN for ATM usage. The cards have a $4.95 monthly maintenance fee and some other fees, but they’re waived if riders use them only for transit.

Train and bus agencies nationwide are looking to reduce costs and add utility to their fare-payment systems to replace proprietary magnetic-stripe and chip cards with general-purpose payment cards issued by third parties that do double duty as fare cards. “Transit wants to get out of the payment card business,” says former MTA official Peter J. Quadagno, president and chief executive of West Chester, Pa.-based payments consultancy Quadagno & Associates Inc. An MTA spokesperson says he doesn’t have details about what will happen with contactless payments in New York after Nov. 30, but adds, “we expect to continue to move forward with the smart card technology.”