Article Highlights

Key Takeaway:

It’s clear that the MTA project in New York is the new showcase for open-loop contactless fare payments that Visa and Mastercard are touting, taking the place of Transport for London’s open-loop service. While growth of contactless fare payments is still going strong in London, it has been more than seven years since the service launched there and the payments networks are seeking to build adoption in the U.S.

Key Data:

Both Visa and Mastercard said that roughly one-third of domestic transactions from cards carrying their brands are now contactless globally. And both pointed to the open-loop fare payments service that the Metropolitan Transportation Authority in New York launched in May 2019 as helping to promote further growth of contactless payment in the U.S.

Organizations Mentioned:

• Visa
• Mastercard
• Metropolitan Transportation Authority

(This premium article was originally published Jan. 31, 2020, in Mobility Payments’ sister publication NFC Times.)

The heads of the two largest payments networks in the U.S., Visa and Mastercard, predict strong growth for contactless payments in the U.S., with Mastercard CEO Ajay Banga noting that 70% of U.S. Mastercard-branded cards in the U.S. are coming up for reissue over the next 12 to 14 months, and most of these cards will be issued with a contactless interface. A large number of Visa-branded cards will be reissued with a contactless interface during that period, as well.

Both Visa CEO Al Kelly and Mastercard’s Banga, talking to financial analysts over the past couple of days following the release of their respective quarterly earnings report, appeared to be speaking from the same script on contactless. Both said that roughly one-third of domestic transactions from cards carrying their brands are now contactless globally. And both pointed to the open-loop fare payments service that the Metropolitan Transportation Authority in New York launched last May as helping to promote further growth of contactless payment in the U.S. 

Contactless transactions, including those with Apple Pay, Google Pay and the other Pays wallets, is still in the single digits of all domestic card payments in the U.S. If figures from the U.S. are excluded, Visa said last April that contactless transactions for cards carrying its brand would account for nearly 50% of Visa card transactions globally, Kelly in speaking to analysts yesterday, noted that in the past year, Visa doubled the number of countries, where face-to-face transactions make up at least two-thirds of total transactions.He didn’t mention the names of the countries, but they include Australia and Poland.

As in July, Kelly said Visa expects that more than 300 million Visa-branded debit and credit cards in the U.S.–around one-third of the total number of Visa cards on issue in the country–will be enabled for contactless by the end of 2020. The payments network, the largest in the U.S., had earlier estimated that there would be 100 million contactless Visa-branded cards on issue by the end of 2019. The rollouts are being led by JPMorgan Chase, the largest credit card issuer in the U.S. and Wells Fargo, the nation’s largest debit card issuer by purchase volume. 

At the same time, major Mastercard issuers are also rolling out contactless-enabled credit and debit cards, including Citi and Capital One. Mastercard said earlier in 2019 that it had received commitments from issuers making up around two-thirds of consumer purchase volume on the Mastercard network that they would roll out contactless cards over the following two years–or by around the end of 2020.  

Banga, in speaking to analysts Wednesday, noted that in addition to the majority of Mastercard-branded cards in the U.S. being reissued during their normal replacement cycles over the next 12 to 14 months with a contactless interface, other Mastercard-branded credit and debit cards, whether contact or contactless, that consumers can load into Apple Pay, Google Pay, Samsung Pay and other Pays wallets could be used to make contactless payments.  

He also noted that more than half of Mastercard-branded payments transactions today are conducted at merchant POS terminals that are enabled for contactless. These transactions could have been contactless if consumers had more contactless-enabled cards in their wallets and were more aware of the technology, he suggested.  

“And when the MTA (Metropolitan Transportation Authority) rolls it out systemwide in New York City, and there are other transit systems beginning to do the same in their cities, I think you will get (an) impetus,” he told analysts. Mastercard, which has offered incentives for MTA customers to tap their Mastercard-branded cards and credentials on NFC devices to ride, said transactions on the MTA with Mastercard-branded payment instruments had surpassed 5 million since the launch of open-loop payments service in May. 

Visa’s Kelly said Visa transactions on the MTA had reached 3 million as of earlier this month. He added that close to one in 10 payments of MTA fares at the gate or on board buses involves a Visa card. The MTA to date has only enabled some subway station gates and buses to accept contactless, but plans to expand to the entire system by the end of this year, Kelly noted.  

It’s clear that the MTA project in New York is the new showcase for open-loop contactless fare payments that Visa and Mastercard are touting, taking the place of Transport for London’s open-loop service. While growth of contactless fare payments is still going strong in London, it has been more than seven years since the service launched there and the payments networks are seeking to build adoption in the U.S. 

So far, transit agencies in only a few other U.S. cities support open-loop fare payments, including Chicago, Portland, Ore., and Miami. But others, including those in Philadelphia, Boston and Dallas, plan to offer the service, as early as this year.  

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