Credit: Marc A. Hermann/MTA New York City Transit/CC BY 2.0 (Cropped)

The New York City subway system recently reached 1 million “taps” in its contactless payment system, as a growing number of public transit agencies adopt the payment technology for its convenience and efficiency.

Why it matters: Contactless payment technology can bring down operating costs and act as a test case for subsequent attempts to make subways more accessible and modern.

By the numbers: Across the U.S., aging transit systems suffer from a lack of funding, resulting in risks to public safety.

  • In 2017, the U.S. DOT identified a backlog of $90 billion in repairs needed.
  • In March, the American Public Transportation Administration estimated a need for $232 billion in "critical public transportation investments."
  • In 2018, U.S. public transit ridership declined to a level not seen since 2006.

Between the lines: The rise of ride-hailing has offered a relatively expensive alternative to public transit, leaving lower-income residents dealing with inadequate service.

What's happening: Transit payment systems in the U.S. are beginning to catch up to programs in other countries.

  • In London, more than half of all transit payments are contactless, via a system set up by Cubic Transportation Systems and Mastercard. This has cut the cost of fare collection down from 15% of revenue to 9% and is expected to reduce it to 6%. (New York's program is modeled on London's.)
  • Rio de Janeiro partnered with Visa to introduce contactless transit payment.
  • Sydney's entire transit network has now incorporated a Cubic contactless payments system, covering an area as big as Switzerland.
  • Portland, Oregon, recently became the first city to integrate Apple Pay into its Fastpass. 

What to watch: Contactless payment can act as an early test case for implementing other potential upgrades and modifications, and the savings these payment systems generate can be put toward repairing and updating the transit infrastructure.

  • It remains to be seen whether such actions will reverse declining transit ridership.

Miguel Gamiño Jr. is the EVP for global cities at Mastercard. He has served as New York City's CTO, San Francisco's CIO and El Paso's CIIO.

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