Transport for London (TfL) has ditched initial plans to launch an electronic wallet service for Oyster card users saying the project would be too costly.

The London Underground and bus operator announced last year that it planned to add e-money facilities to Oyster card to allow commuters to pay for low-value goods and services at newsagents, fast-food outlets, supermarkets and parking machines.

But after more than eight months of negotiation with financial services and technology firms TfL has decided that it will be too costly to roll out the scheme.

'We have been in negotiations for a while and after this have realised that it is not economical to process e-money in the way that was originally planned using the existing Oyster card,' a TfL spokeswoman told Computing.

The decision means that TfL has concluded negotiations with a group of companies bidding to run the project, including: alphyra; Barclays; BBVA, Accenture, MTR and Octopus; EDS and JP Morgan; Nucleus; Dexit, Ericsson, Hutchison 3G and Euroconex; and PayPal and Royal Bank of Scotland.

'We will only consider options that will provide revenue and benefits to customers. The discussions we had showed it was too expensive,' said the TfL spokeswoman.

But TfL says that despite e-money being unsuitable using the current infrastructure it still hoped to introduce a micro-payments system in the future.

'We are still interested in e-money and customers like the idea. We are looking at other ways of doing this. It could be something like putting Oyster card technology on to a bank card,' said the TfL spokeswoman.

The news will come as a blow to high-street retailers, including Pret A Manger and Starbucks, who originally welcomed the scheme that could increase the number of purchases in its shops.

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