MTA/NYCT Phase II Pilot
Smart Card Alliance2010 Payments SummitFebr ar 23 25 2010February 23-25, 2010
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MTA/NYCT Business Considerations: Identify further efficiencies prior to moving to new open payments system Don’t simply layer on top of what exists
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system. Don t simply layer on top of what exists
NYC Transit 2008:
Fare Collection Operating Costs per Dollar of Revenue: 15 cents File Nam
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Fare Collection Operating Costs per Dollar of Revenue: 15 cents– Primary Sales Channels: Vending Machines, Station Booths, Retail Merchants,
Transit Benefits, Bus (cash on-board)– MetroCard Costs per $1 of Revenue:
• Low: Vending Machines w/ credit/debit (4 cents) and Pre Tax Benefit Providers st Modified: 2/18/2010 10:45A
• Low: Vending Machines w/ credit/debit (4 cents) and Pre-Tax Benefit Providers (3 cents)
• High: Station Booths w/ cash (34 cents)– Major Costs: Personnel, Collection, Maintenance, Interchange, Commissions,
Ti k t t k
AMTicket stock
Fare Collection Operating Costs per Dollar of Revenue – by Payment Type– For Vending Machine, Station Booths (cash only), Bus (cash on-board):
C dit 4 t• Credit: 4 cents• Debit: 3 cents• Cash: 27 cents
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MTA/NYCT Phase II Pilot: Transit Payment Platform (TPP)F Account based transit fare payment system File N
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Contactless bankcard payment media
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Regional back office system for NYCT, PATH, and NJT
One customer account for three agencies
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On-line card processing system
Multi-agency fare products
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MTA/NYCT Phase II Pilot: Fare ManagementF
Automatic replenishment and fare product renewal
PayAsYouGo aggregation File Nam
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PayAsYouGo aggregation
Handles agency transfer rules
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MTA/NYCT Phase II Pilot: Customer Care FunctionsF
Single customer website for regional system
Consolidated c stomer acti it across agencies File Nam
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Consolidated customer activity across agencies
Account maintenance– Product purchase st M
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p– Enroll / un-enroll automatic replenishment– Disputes, reversal, and refund management
Call recording and a dit f nctions AM Call recording and audit functions
Customer service controls– Ride disputesp– Adjustments / reversals– Refunds / disbursements– Balance transfer
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MTA/NYCT Phase II Pilot: Fraud Management and ControlsF
Payment device validation with issuer bank at account setup
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Validation & Preauthorization for PayAsYouGo rides at start of aggregation cycle
Real-time device validation during taps
Hotlist management st Modified: 2/18/2010 10:45A
Hotlist management– Agency restricted device list– Payment history based negative device list– Card brand(s) negative lists
Velocity checks AM Velocity checks
– Reader level validation– System wide global checks
Reader online to TMIP
Reader standalone redundancy (orphan mode)
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MTA/NYCT Phase II Pilot: Financial ManagementF
Detailed financial audit trail
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End-of-day bank settlement functions
Data feeds to MTA Datamart, PATH, and NJT Hosts st Modified: 2/18/2010 10:45AA
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MTA/NYCT Phase II Pilot: Managing Risk-Cost-Customer ImpactsF
Pay-As-You Go Transactions:
Objective: How to balance Risk Cost Performance*
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– Fraud/Abuse– Account Status Verification– Taps when in “orphan mode”– Maintain required transaction times st M
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Maintain required transaction times– Address Different Pay-As-You Go Products:
Full FareFull Fare Reduced FareReduced FareExpress BusExpress Bus
••Full FareFull Fare••Reduced FareReduced Fare
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Components:Authorization Process
• “What is an acceptable level of risk?”
CombinationCombination
What is an acceptable level of risk?Aggregation Model
• Threshold defined by: $’s?, # of days?, # Taps?Issuer Account Holds
• “How will it affect our customers?”
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• How will it affect our customers?
*Alignment of all three regional agencies
MTA/NYCT Phase II Pilot: Managing Risk-Cost-Customer ImpactsF
Authorization: – Leverage a combination of both existing and/or new rules – Couple aggregation rules with methodology to mitigate first tap risk
While keeping payment processing costs down File Nam
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– While keeping payment processing costs down
Aggregation: – Simple customer message
Eliminate/minimize any negative impact on our customers and their pilot st Modified: 2/18/2010 10:45A
– Eliminate/minimize any negative impact on our customers and their pilot experience
Account Hold: I t i ll h ld hi h t t iti t l h h t
AM– Issuers typically hold higher amounts to mitigate losses when merchants
aggregate transactions – Therefore, the Issuer Hold was a factor in determining the model being deployed
in the trial W k d ith M t C d t t h i i ti l d– Worked with MasterCard to create an approach using existing rules and processes to employ a model that was acceptable to all the Stakeholders while offering minimal service disruptions to the cardholders
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MTA/NYCT Phase II Pilot: System Architecture RequirementsF
Faster Transaction processing than retail is critical
Therefore, Risk Management required is different
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Transit fare products pricing - different than retail
Therefore, payment platform interface to transit “Fare Engine” must be handled differently st M
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must be handled differently
Must convert taps into transit transactions
But beyond that behave like any other merchant AMBut beyond that, behave like any other merchant
Risk Management Rules (e.g. when connectivity is < “perfect”) must meet business and operating needs
Therefore, “Customer Friendliness” of these rules must also be addressed
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MTA/NYCT Phase II Pilot: System Architecture RequirementsF TMIP remains the purview of financial institutions – Leave it to the Networks File N
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TMIP remains the purview of financial institutions Leave it to the Networks
Transit agencies can focus on the Fare Engine
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Keep it OpenKeep it Open Keep it SimpleKeep it Simple
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MTA/NYCT Phase II Pilot: System Architecture, SubwaysFFile N
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MTA/NYCT Phase II Pilot: Processing of Subway TransactionsKey Requirement: Communication System(s) within Subway Environment f R l Ti A th i ti t P i t f E t
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for Real-Time Authorizations at Point of Entry
Data– Application layer data encryption File N
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pp y yp– Secure encryption key management between reader and back office
NetworkB ild i t i l ti f il t
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– Build interim solution for pilot– High speed fiber network– Redundant T-1 connections to ACS data center
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MTA/NYCT Phase II Pilot: Subways Next StepsF
Pilot vs. Systemwide Deployment– Develop multiple design models– Leverage existing high-speed fiber network capital investments File N
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Systems requirements document– Consider varying subway station types– Equipment procurement installation and ongoing operating costs st M
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Equipment procurement, installation and ongoing operating costs – Meet required transaction times with real-time authorization
An approach: utilize a wireless medium for data transmission within i ti fib t k f ll b t ti t t t
AMexisting fiber network for all subway station structure types
– Potential issues to be vetted:• Cellular modems • Point-to-point• Wireless fidelity
Final Outcome: Fiscally prudent methodology of data transport– Design schemes to support system-wide deployment of open-payment system
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g pp y p y p p y y
MTA/NYCT Phase II Pilot: System Architecture, BusesFFile N
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MTA/NYCT Phase II Pilot: Processing of Bus Transactions
Key Requirement: Communication System(s) within Urban Environment for Real-Time Authorizations
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y q y ( )On-board Vehicles
Security
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Data– Application layer data encryption– Secure encryption key management between reader and back office
Network– RSA based EVDO channel encryption st M
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– RSA based EVDO channel encryption– Multi-stage and layered reader authentication process– Registration with Verizon network– Secure firewall controls at ACS data center
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Communications
– 3G Wireless– Front End/Back End
• VerizonVerizon• ACS
– Testing Certification– Out-of-communications (tower location/canyon effect) – Latency results - less than 500ms round trip transaction times
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MTA/NYCT Phase II Pilot: Bus Equipment InstallationF
– Invasive process– Written, detailed procedures– Quality Assurance/Quality Oversight Inspector– Kitting
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– Testing • Destination Code Interface• Tap verification to ACS Platform
– Certification/Checklist st Modified: 2/18/2010 10:45AA
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Business Considerations for TransitTransit can generate contactless usage across broad market sectors creating
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value for networks, issuers and acquirers
Opportunities– Advance business and customer-oriented goals and objectives File N
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g j– Negotiate commercial arrangements to mitigate interchange and rules-related
risks (network exclusivity, co-branding partnerships)• One of the multiple potential paths available• Must ensure equitable access for all mass transit riders st M
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• Ultimately, the best path may not include preferential arrangements
External Considerations– Don’t introduce “new” fees for transit customers A
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• “Customer friendly” commercial arrangements (e.g. avoid traditional gift card fees)• Closed loop, reloadable private label cards
Internal ConsiderationsInternal Considerations– Generate revenue [Reverse Interchange]
• Reload services for General Purpose Reloadable (GPR) prepaid cards for non-transit funds– Credit/Debit Processing Fees
• Existing fee categories are costly and not tailored to transit needs
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g g y• Coordinated effort by transit agencies for new “fee category”
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