Contactless payment is just the ticket for FirstGroup buses

The UK's largest bus and rail operator, FirstGroup, is to invest £27m in contactless technology for its buses.

Initially, the system will be similar to London's Oyster card, allowing customers to touch in and out with capped fares using smartcards that are approved by ITSO, a body that sets the common technical standard for smartcards.

The technology will also allow customers to use the contactless cards as debit or credit cards from late 2012.

This means that pre-payment and topping up are not required, as the cost of the fare will be deducted from a customer's bank or credit card balance. The system will also be able to accept payment from a mobile phone.

"The public transport industry will increasingly rely on new technology such as contactless bank cards and mobile phones to both retain and attract customers. It's an exciting prospect," said Giles Fearnley, managing director of FirstGroup's UK bus division.

"We strongly believe that simplifying bus travel and introducing a maximum capped daily fare will strongly support our passenger growth plans. In particular, we think it will encourage car users to make the shift to bus especially given the continuing high costs of fuel."

Almex, part of ticketing specialist Hoeft & Wessel, has signed an £18m contract to supply the ticket machines to First Group.