How New York City is Acting Like a Tech Company

NYC’s new OMNY MetroCard shows how the city is creating products that better meet customer needs, just like tech giants like Amazon do.

While it’s easy to get sucked into discussions on “important” topics like COVID or politics, sometimes it’s fun to focus on the little things in life. These little things can be incredibly frustrating. Other times they can lead to wonderfully delightful surprises.

Before COVID,⁽¹⁾This is less of an issue these days, now that I use a Citi Bike for work. one of my minor frustrations was deciding whether or not to buy an unlimited ride subway card or a pay-per-ride card. I’d used to take the subway 5 days a week and a little on weekends. An unlimited ride monthly was normally the right choice. It paid for itself plus a got juiced up that I could ride the subway for free to explore the city. The unlimited ride ticket helped me feel more connected to the city. But what if I went on vacation? What if I had work travel? I would feel cheated if the pay-per-ride card was cheaper that month.

I wanted someone or something to just choose the best card for me. I wanted a card that acts like a pay-per-ride card when I needed it and an unlimited one when I needed it. This is what the new OMNY MetroCard is doing. It’s a card that works like a pay-per-ride card on weeks when you don’t use it a lot and then unlimited weekly on the weeks when you do. It’s literally a card that transforms itself. That’s not the way that it’s being marketed though.

Here’s how it works. New York City has a new(ish) pay-by-phone system called OMNY (you’ve got to love the wordplay). Instead of getting a MetroCard, all you have to do is take out your phone and swipe it against the turnstile reader. With an iPhone, you don’t even need to unlock your phone.

Recently, OMNY created a new kind of subway card. It’s being marketed as an improvement over the pay-per-ride card. You ride 12 times starting on a Monday and every ride after that is free. But here’s the kicker. 12 rides is the same cost as paying for a weekly pass⁽²⁾A single ride is $2.75 and a weekly is $33.. So with every ride that you’re purchasing with OMNY you’re also getting one-twelfth of a weekly pass that expires at the end of the week.

Amazon offers a product with similar transformational properties through Amazon Prime Video. When looking to buy a season of a TV show, I have the option of buying the whole season or individual episodes, with the whole season costing more in total but less per episode. But with Amazon Prime Video, I can purchase a single episode, and then, later on, I can use that purchase price toward the whole season. So I’m purchasing the episode but also part of the season. Eventually, as I buy more episodes, I get the whole season for free once I reach the price of the season. It’s two products in one!⁽³⁾Correction: Previously, I’d made a much stronger claim which turns out to be false. I thought that each time you rent the movie you get credit towards buying the movie. The credit you get toward purchasing the movie is the amount you pay for the rental. So when you rent the movie, you aren’t just renting it, but also buying a piece of it too. If this were true, there’s no reason to buy a video anymore.

This is a fundamental shift in the way products are sold. Previously, companies would treat their customers as adversaries. For example, a company might sell a gift card with a provision that said something like, “If you don’t use this gift card in a year, we will start charging you a $2/month maintenance fee.” You’d pull out an unused gift card from a drawer only to find that it didn’t have money on it—with the company pocketing all the value. But a few customer-centric companies bucked this trend. I remember when I saw that Starbucks didn’t have an expiration on its gift cards. It made me feel very warm and fuzzy about the company and greatly encouraged me to buy a gift card. Over time, this loyalty toward customers drove Starbucks to one of the largest gift card businesses in the country.⁽⁴⁾In 2021, Starbucks accounted for 10% of all holiday gift card sales—$3B out of a total $28B

So why are we seeing this change to more consumer-friendly products? First, companies are playing catch up with tech giants like Amazon and Google. Tech companies are putting the customer first instead of profits and everyone else is playing catch-up. To paraphrase Ukranian President Volodymyr Zelensky from his television show Servant of the People,⁽⁵⁾In addition to being the name of his television show, Servant of the People is also the name of Zelinsky’s political party “We are here to serve the people. The people are not here to serve us.”

Technology has also allowed companies to create innovative and fungible products because they are no longer physical objects. In the old days, you had a subway token which was a physical metal object. A weekly or monthly ticket was a paper ticket. It’s very hard to transform a token into a paper ticket. But when both of these are on a phone, it becomes possible.

Getting back to the new OMNY card, it’s a great start but there are a few improvements that I would make:

Let me use tax-free money with OMNY. I get to buy my MetroCard with tax-free money using the TransitChek program but this doesn’t currently work with OMNY.

Make OMNY work as a monthly card rather than a weekly. Monthly cards are far more commonly used by locals. Weekly cards are only used by tourists. So make the OMNY card work for people that live here.

Change it from a “pay-per-use that turns into an unlimited when you use it a lot” to “an unlimited card that turns into a pay-per-use card (and gives you a discount) when you don’t use it.” This one is a little complicated. As we said, this card is a mix of a pay-per-ride card and an unlimited card. The current card starts with the pay-per-ride card and then transforms into an unlimited card for the week once you take more than 12 rides. I think it should be a monthly card that you pay for up front. At the beginning of the calendar month, you’d buy this new card at the price of a monthly. If the number of single rides in that month would be less than a monthly, you’d receive a discount for the difference. You’d only pay for the number of single rides you made. Below are some examples of how it would work (keep in mind that a single ride is $2.75 and a monthly card is $127 or about 46 rides):

Scenario 1 (Works as an unlimited card)

In January I take the subway 2 times a day every day including weekends. That’s $170.50 (31 days x 2 rides x $2.75) rides. But a monthly pass only costs $127 so I’d only pay $127 that month.

Result: 62 rides for $127 (the price of a monthly)

Scenario 2 (Works as a pay-per-use card)

In February, I went on vacation for a week. Also, I didn’t take any rides on the weekend. So 15 days at 2 rides a day is $82.50. I’d paid $127 in the beginning of the month so I’d get $44.50 back. I think this should be sold as a monthly subscription product so this value would be credited to my payment for next month’s card.

Result: 30 rides for $82.50 (the price of a pay-per-ride card)

Starting with a monthly card has a number of advantages:

1. Customers only pay once a month so they don’t feel the pain of paying each time. This would encourage them to ride more.
2. Customers always get some sort of a gift at the end of the month. If they don’t ride enough, they get a discount at the end of the month. If they ride more than the cost of a weekly, they see how much they saved by not paying for each additional ride. Both of these “gifts” build loyalty.
3. It automatically gives people the best option between a monthly and a pay-per-use. Because they’re only paying for what you use, more customers would sign up for this card and not have to worry about how they were being charged.
4. Customers feel like they already have a monthly so they will ride the subway as if they had a monthly because they would think of every ride as “free.”
5. It sends the message, “We care about you as a New Yorker. Use the subway as you want to use it and we will give you the best price.” The subway becomes utility that you don’t need to think about.

Even though the current product still has areas for improvement, it’s a good start. The city is aligning the product with customer needs rather than just thinking about making a profit. It’s acting like a tech company! Tech companies understand that customers will always have a desire for improvement and that it’s the company’s job to meet that need. Amazon’s Jeff Bezos sums it up when he says, “Customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great.”