Oyster to be replaced with sQuid - the Telegraph

Where Oyster clammed up, sQuid is ready to cash in

NM Rothschild, the investment bank, has been appointed to raise £15m to fund the launch of a cashless card payment system designed to be a rival to Transport for London's Oyster card.

The new card, to be called sQuid, will not be used to pay for journeys on public transport, but instead will be an alternative to using cash for low-value transactions for goods and services at newsagents, parking machines, coffee shops and other retail outlets.

The decision by Nucleus, a branding agency owned by Peter Matthews, the entrepreneur, to push ahead with the sQuid card follows the failure, admitted earlier this month, of TfL to reach agreement with a commercial partner to extend the use of the Oyster card beyond public transport.

TfL had spent almost a year negotiating with a shortlist of potential partners that included Royal Bank of Scotland, Barclays, PayPal, Alphyra and several consortia, including one that involved Octopus, the Hong Kong cashless card that seems to have inspired the fishy branding of the cards in Britain.

TfL said that setting up a link with a financial partner or bank to develop the service had proven too difficult and expensive. A spokesman said that TfL might look again at the idea in the future as it would encourage uptake of the Oyster card, but that the cost and risk to TfL were too high at the moment.

However, Nucleus believes that the technical issues can be resolved and that a partner can be found to take on some of the risk. A spokesman for the company said the plan was to launch sQuid in the first quarter of 2007, deploying existing, tried and tested technologies including the "touch and go" system used by Oyster.

Security worries over the cards will be reduced by holding all account information centrally rather than on the card. The ambition is that the cards should be much quicker and easier to use than credit or debit cards.

Consumers in the UK make around 27bn cash transactions a year, worth £250bn, and around 80 per cent of these are purchases of less than £10. Nucleus estimates that the market for cashless card transactions will be around £20bn and that there is space in the market for about four providers.

Card issuers are keen to extend the use of cards to purchases of lower value and both Mastercard and Visa have piloted contactless cards in the US.