NJ Transit Starts Tap-And-Pay Smartphone Option With Google

New Jersey Transit began letting some commuters pay for fares using smartphone sensors set up by Google Inc. (GOOG) at locations including New York’s Penn Station.

The public-transit system is the first to partner with the company on its Google Wallet “tap-and-pay” system, which gives businesses access to credit-card information when a customer waves their phone over a sensor to make a purchase. The near- field communication technology is in use at retailers The Container Store, Foot Locker and Macy’s, according to Google.

New Jersey Transit, the third-largest U.S. transit system with more than 895,000 weekday trips on bus and rail in New Jersey, New York and Philadelphia, will help Google widen its customer base, the company said in a statement today. Google, the largest Internet-search company, gets most of its revenue from selling advertising on its websites and through software such as its Android operating system for mobile devices.

“Transit is the fastest way to accelerate adoption and reach usage density in major urban centers by habituating the behavior of tapping and paying with phones,” Stephanie Tilenius, vice president of commerce at Mountain View, California-based Google, said in the statement.

The service is only available on Sprint Nextel Corp. (S)’s Android-based Nexus S 4G phone and users must charge items to Citigroup Inc. (C) MasterCard credit cards. Google said it’s expanding to other Android phones and is teaming up with Visa Inc. (V), Discover Financial Services (DFS) and American Express Co. to expand to other cards.

New York City

New York’s Metropolitan Transit Authority, which carries 8.5 million riders a day, is working on a contactless pay system, and piloted one with cards linked to bank accounts in 2010, said Kevin Ortiz, a spokesman. The biggest U.S. transit agency will request proposals for the design and architecture of the program soon, with a goal of completion by 2015, he said.

Transit systems have more incentive to partner with mobile- payment providers than retailers do, said David True, a payments consultant in New York for MCAWorks. Tap-and-pay NFC technology has the potential to reduce ticketing costs if enough people adopt it, whereas in retail, merchants have to spend on hardware without much benefit.

“If you look in Japan and Hong Kong, places where NFC is widely used, it’s in transit,” he said. “Google wants to get people used to using and paying with their phone, and transit should be a more willing and able participant.”

New Jersey Transit didn’t pay anything in the partnership, according to the statement. Google Wallet is available at New Jersey Transit’s New York’s Penn Station ticket-vending machines, at Newark Liberty International Airport rail station, and on buses 6, 43, 80, 81, 87, 120, and some on the 126 line.

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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