The death of the Oyster? TfL’s plans for contactless payments


TfL’s money-saver will appeal to tourists, but will Londoners go for it?

Pret A Manger already uses it and so does McDonald’s, your local Tesco is probably testing it out and, by 2013, TfL hopes to use it across all of its services. Contactless payment will soon be a part of your everyday commute.

City Hall’s transport committee met last Tuesday to discuss the progression of TfL’s plans and how it will affect the public.

The system, to be rolled out across the bus network from March, will make travel in the capital significantly easier for visitors as they will not need to buy a special card and bring it with them when they come to London.

“Printing tickets and handling cash are things that get in the way”

Ed Hamilton, Analysys Mason

“For customers arriving in London this is a huge simplification,” Will Judge, head of ticketing at TfL, told the committee. “They will arrive, see a logo that they recognise and be able to swipe in and use the system straight away.”

 “Transport companies across the world want to simplify the way their citizens access travel,” Ed Hamilton of technology consultants Analysys Mason explained.

“Printing tickets and handling cash are things that get in the way. We have already gone a long way with the Oyster card, but Oyster is still something you have to think about. You’ve got to remember to charge it – the next thing is to move it so it directly accesses the source of money.”

The benefits for customers go beyond the ease of not having to top up or think about tickets, according to the board.

One of the common complaints about the Oyster system is the difficulty of getting refunds if mistakes are made in charging. Too often the system at TfL is aware that an overcharge has occurred but it has no way to put it back on the card without the customer and card being present.

“The use of contactless bank cards will break the link between the delivery of the refund and having to get proximity to the card,” explained Judge.

All of the information about your journeys and charges will be available on the TfL website and payment will be taken from your card in one sum at the end of each day.

Reducing the costs for TfL

The integration of the new system has not been spearheaded merely to make life easier for London’s commuters – unsurprisingly, TfL is poised to benefit in the long term.

Following extensive research TfL made into its existing systems it emerged that for every £1 TfL collects from Oyster card ticket sales, 14p is being spent on the actual system. Having deemed this too expensive, TfL wanted to find the best way to keep costs down and, at the same time, enhance customer experience.

The integration of contactless bank cards was deemed to be the most suitable alternative.

TfL has invested £75m in covering the cost of enabling the new system across the board to include pay as you go and weekly cap offerings. The ticketing department at TfL is confident that the system will save them £15 to £20m each year – breaking even after around four years.

Savings will be made in a number of different areas.

“We can avoid issuing new cards to every person who arrives in London without an Oyster,” said Judge. “Much of the burden of customer service falls on us at the moment – in the new system banks will take on a large part of that responsibility.

“Lastly, we will save money on commission we pay to our retail partners – currently we pay out two to nine per cent on revenue to small retailers that sell our products – we hope to get that down to 1 per cent.

“You cannot extract enough information from a card to spend someone else’s money”

Will Judge, TfL

The potential loss of revenue stream for many small retailers was something that the committee addressed, and the response from TfL was hopeful but rather vague. While it acknowledged that fewer Oyster transactions would be made with retailers, the potential for future products, such as pre-paid TfL cards, would soften the blow.

“We are in discussions with companies that issue pre-paid cards and use them in innovative ways,” said Shashi Verma, director of customer experience at TfL.

“I can’t spell it out right now because we haven’t done the deals yet, but I wouldn’t be surprised if retailers end up with a better proposition than they have today.”

An issue of safety?

Pula Houghton, director of policy at Which? found that one of the main concerns highlighted by consumer research was that of knowing how much you have spent without ever getting receipts.

“People are worried about the loss of control around the payments,” he said. “Sixty per cent of people think it will be hard to keep track of expenditure. People need to be able to see their cumulative daily total as they pass through.”

TfL responded that it would explore all of the technology available with the aim of having a simple mechanism that shows you how much you’ve spent when you touch in.

In terms of fraud, Judge was quick to stress that the system was “100 per cent safe”.

“You cannot extract enough information from a card to spend someone else’s money,” he stressed.

Do you have a contactless bank card?

The project will give passengers with contactless-enabled Eurocard, Mastercard or Visa cards the ability to pay using existing Oyster card readers. But one of the major issues flagged up by the committee is the overall penetration of contactless payments in the public.

Houghton said Which?’s customer research showed that the public has been slow to embrace contactless cards.

“People are broadly supportive of the plans for TfL, but contactless bank cards are not a form of payment that has caught on in the public’s mind. A small portion of people have used it, but penetration is probably going to be quite low during the first phase of TfL’s plans as people just don’t know about it.”

TfL agreed with Which?’s findings, but expressed confidence that public use of cards would increase once it rolled out its plans.

“We have been pressuring banks and building societies collectively to market this service more clearly and proactively,” said Judge. “We are significant actors in this space and we believe banks are holding off marketing it until our services are ready.”

TfL is only too aware use of contactless bank cards for public transport might take time to build. Take-up of Oyster cards was slow when they were introduced in 2003.

Introducing loyalty points systems to encourage the public to use the cards (a device used in Japan) was discussed during the meeting, but Judge was clear that the intention is to launch without those persuasive tools and wait to see how London’s commuters react.