Lloyds TSB has started a multimillion-pound contactless card payments trial in London, ahead of plans to create a totally cash-free environment for the 2012 Olympics.

Customers participating in the pilot will be able to hold the card up to a reader to take money out of cash machines or make purchases worth less than £10.

The technology will be rolled out across the UK this summer. In 2012, spectators and participants at the London Olympics will be issued with the cards to handle everything from taxi bills and stadium access, to purchasing food and drinks inside the venues.

“The Olympic committee wants to make the events as cashless as possible, and contactless technology will play a big part,” said Lloyds TSB Cardnet head of business enterprise Kevin Coles.

“We are investing a substantial amount in the new technology, on top of last year’s £80m Olympic sponsorship deal.

“Point-of-sale providers and other retailers are helping us to implement an efficient service by 2012,” he said.

Lloyds TSB is not the only bank investing in the technology for general use. Some five million cards will be issued by the end of the year, and will be accepted in more than 100,000 outlets across the UK.

The most important factor for the Olympics scheme will be speed, according to Butler Group analyst Sarah Burnett.

“Transactions will have to be completed quickly in such a large-scale event, otherwise people will go back to using cash,” she said.

The technology also offers benefits for retailers, eliminating the need for small change and providing a clearer view of which products and services are in demand. But there is room for convergence.

“Mobile payments using near-field communication will be competing with contactless cards, when the two technologies should be combined to provide better functionality,” said Burnett.

Lloyds TSB’s cards have a £50 transaction limit to control use. The cards do not need a PIN, but are still more secure than cash, said Sarah Hayes, an executive at payments group Apacs.

“Contactless cards require holders to verify transactions according to criteria such as times used or value of purchase,” she said.