It was 1989 when the MTA in NYC entered into discussions with NYNEX and Mitsui (which had acquired the worldwide licensing rights to Nippon Telegraph & Telephone's prepaid phone card technology) to explore the concept of using prepaid transit cards to buy small dollar value items in and around NYC. MetroCard was on the drawing boards and we hadn't named the product yet. But we had 3600 payphones on the MTA's properties and ran it as a business - for profit. I wanted to do the same thing with our proposed new prepaid card that we eventually called 'MetroCard.' Turn it into a for profit business. So we spent resources to determine the best approach for expanding MetroCard's payment utility. Simultaneously, WMATA in DC was expending resources to investigate the use of bank-issued cards to pay for transit rides and access. Peter Benjamin, WMATA's-then CFO, would argue with us at the MTA on two fronts. First, we stole their name. Since they were the Metro, they should have rights to MetroCard. Secondly, he thought we should leave payment systems to those who did it for a living. Banks and networks, not transit operators. But since my background was payment systems, I argued against his position.
Today, London, Hong Kong and Singapore are 3 cities that have made their transit-issued prepaid cards usable for purchases other than transit. And they're finding merchants willing to accept it as payment. Meanwhile, Visa and MasterCard are in tests with the MTA in NYC and other cities in the US to determine if bank-issued, contactless smart cards can be used to access and pay for transit services. The fact is, my premise for MetroCard was based on two important ingredients - we (the MTA) had over 5.3 million riders daily, which translated into about 3 million people. And we could force adoption. A payment system that can force adoption by that many people (by eliminating tokens and telling those 3 million people that if they want a bus or subway ride, they'll have to adopt MetroCard) can realize great success, as measured by cards in use, the transactions they perform and the places where the card can be used. It will draw in merchants because so many people are carrying and using the card. But in cities like Atlanta, Pittsburgh, Philadelphia, Boston, Miami and Los Angeles, using transit cards to pay for everyday, small dollar value items just doesn't stack up to making a payment system successful. There are too few people and that, in turn, will draw in too few merchants. And that means taking a long, hard look at what WMATA wanted to do all along. WMATA would tell you, "we're transit people - we know how to move a person from point A to point B. We're not payments industry people and we should leave card issuance and payment system functions to those that know it best - THE NETWORKS and THE BANKS.
I think I've come full circle. I think WMATA and Peter Benjamin's position is the correct one and we ought to get the transit vendors and the payments industry people singing out of the same hymnal. And because transit systems are, by nature, insular, this won't be an easy task. Nevertheless, Cubic, Scheidt & Bachmann and Thales all seem willing to go down this path, which needs to be explored thoroughly. We should all look forward to the outcomes of the tests that Visa and MasterCard are conducting these days.
Regards from a payments industry person who spent time in transit clothing
Peter Quadagno
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