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After seven months of testing an iPad-based payment system in New York taxis, Square is officially terminating its pilot, well short of its original planned ending date, according to a letter sent to the New York Taxi and Limousine Commission on Friday.

Square said it was ending its trial because it wanted to try a different hardware and software combination for the so-called “passenger enhancement project.” The company explained that impending taxi regulations in New York and elsewhere meant it would be “commercially unreasonable” to pursue a new hardware-software combination while still supporting the current pilot program.

The letter suggests that Square has gotten enough feedback and now it’s ready to start working on a more advanced product that will compete for the next taxi contract in New York. The city is currently drawing up specifications and rules for the next taxicab passenger enhancement project or “TPEP” — the term used for New York’s efforts to improve the in-taxi payment and entertainment experience.

The commission approved Square’s plan on March 1 to outfit 30 taxis with protected iPads that allowed people to make simple credit card payments and follow their progress on a map. The original plan was to conduct the tests through Feb. 15, 2013.

During the trial, which ultimately involved about 15 vehicles, Square’s taxis logged 28,000 trips and almost 100,000 miles. The end of the pilot comes after a recent report suggested that the city and Square were close to signing a deal that would bring Square into 1,000 taxi cabs. That report was denied vigorously by both Square and the commission.

Square said it will reimburse medallion owners and taxi cab drivers who participated in the test. Square will pay the cost of uninstalling Square’s system and reinstalling another system from VeriFone (s pay) or Creative Mobile Technologies, the two incumbents. And Square said it will also pay $378 to each medallion owner and taxi cab drive to cover the estimated difference in processing fees between its service and other existing in-taxi technology services for the remainder of the original trial period.

It’s unclear what Square will do next but it appears like the company will continue to develop an in-taxi product for payments.

“…Square looks forward to further improving our product and making commerce and transportation easier for millions of riders and drives in New York and around the country,” wrote Square’s general counsel Dana Wagner in the letter.