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

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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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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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