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How Transport for London laid the tracks for contactless payments and the cashless society

03 September, 2015George Browne

This week saw the maximum payment that can be made using NFC (Near Field Communication) or contactless payment cards rise from £20 to £30, a further extension of the system that has been steadily growing in popularity.

Tap and go on the tube

When ‘tap and go’ payment technology was first introduced in 2007 hardly anyone noticed. Indeed, hardly anyone noticed until September 2014, when the introduction of contactless payments on the London Underground network sparked a surge in the numbers of people using the new cashless system. What few people realise is that TfL played an important part in bringing the technology to market.

In the light of recent Tube strikes and the news that the night tube is to be delayed, many Londoners might think that TfL has a poor track record of where forward planning is concerned, but it was just two years after the introduction of the Oyster system when they started the hunt for its replacement.

Ahead of the mobile payment game

Promising early experiments with NFC tech ran into difficulties when mobile phone manufactures and the carrier networks failed to agree a set of universal standards, which left the door open for contactless cards. The technology had lots of advantages for Tfl. First, passengers were accustomed to using a plastic card to get through the barriers, so introducing the new technology would not present any cultural problems. Second, they don’t need constant topping up, which reduces the need for ticket windows and queues for ticket machines. It prevents congestion in stations and completely does away with that annoying moment when you reach the front of the queue for the barrier only to discover that the Oyster card is out of credit. By July this year there were more than 12.5 million journeys being made using contactless, which makes TfL one of the biggest contactless merchants in the world.

The growth of contactless payment doesn’t seem to have been hindered by a recent Which? investigation that suggested that the cards were vulnerable to fraud. This is probably because instances of this kind of fraud are vanishingly rare, and because customers are fully protected against such losses as long as they take reasonable steps to keep the card safe.

Contactless the new normal

 Contactless payment is quickly establishing itself as the new normal when it comes to making small purchases. The increased limit and a societal move away from one big weekly supermarket shop to smaller, more frequent trips means that the average supermarket spend (£25) now falls within the limit. Given that one in three contactless payments is currently made in a supermarket, this change should see a further rise in the use of the technology, and has prompted Sainsbury’s to introduce the technology, having held out up until now.

Although the new limit became effective as of 1st September, reports indicate that it may take until the end of October for all shops to update their card reader terminals. The industry’s stated aim is for every retailer to have tap-and-go technology by 2020, but without TfL’s desire to drive innovation in this area, the wait would likely be rather longer.