NFC TimesThe premier source for news, analysis and commentary on
Near Field Communication and all contactless technology

Transport for London plans to begin allowing riders to use contactless bank cards to pay fares on buses later this week, according to a report.

The big London transit authority will start accepting fares on London buses from contactless credit and debit cards starting Thursday, the Financial Times reported. 

A Transport for London spokeswoman told NFC Times she could not confirm the report, but did say the authority plans an announcement on the topic on Thursday. 

Transport for London oversees operation of more than 8,000 buses in and around the British capital. The agency had planned to introduce open-loop fare collection in time for the Summer Olympics in London, but delayed the launch, citing “complex development work in conjunction with the card payments industry.”

The move makes Transport for London the first major transit agency to introduce open-loop payments worldwide. Others, such as those in Chicago and Philadelphia, among a few other large cities in North America, are still gearing up for open loop.

Transport for London said it plans to expand the bank card–and presumably NFC phone–fare payments to its massive London Underground service next year.

That is a significant step, since the system calculates the open-loop fares in the back office, not at the terminals, as is now done with Transport for London’s closed-loop stored value card, Oyster.

Using bank cards for fare collection on buses is considered an easier step, since these are not distance-based fares and riders only tap once, when they board.

But the London Underground will require riders to tap in at entrance gates and tap out at their departure stations. So distance-based fares, along with other fare policies, will have to be calculated in the back office.

Transport for London next year also plans to extend open-loop payments to the tram and light-rail services it oversees. Riders will continue to be able to use Oyster, though the authority is hoping the move to open-loop payments reduces use of the expensive Oyster system.

The authorization system does not immediately send transactions online for approval, which could be a problem for London riders wanting to use contactless prepaid bank cards or bank-issued applications on NFC phones. 

Transport for London, as of last summer, was not planning to accept prepaid contactless bank cards or prepaid applications on NFC phones on buses.

That's because the authority might have to pay higher transaction fees to banks or bear greater liability for fraudulent transactions–since the banks can’t immediately go online to check for funds in the riders’ accounts. So far, the bank-issued applications on NFC phones are prepaid in the UK.

This situation might have changed following negotiations between the authority and payments industry.