The card, which removes the need for cash when buying tickets, is the first of its kind in the UK and aims to provide faster passage for the six million users of London's transport network.
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Smartcard equipment has already been fitted on 6,000 buses and at more than 250 tube stations and 28 mainline rail stations in the capital.
Designed and managed by the TranSys consortium of companies for Transport for London and London Underground, Oyster uses similar technology to RFID, electronic tracking tagging, which is proving popular in the UK retail sector, said Paul Monk, technical designer at TranSys member Cubic.
Oyster also uses an electromagnetic field, although it operates at a higher frequency between antennae on the reader and the card, he added.
"It uses exactly the same principle as RFID - an electromagnetic field that modulates the power between two antennae,” said Monk. “But contactless smartcards operate at a higher frequency to achieve higher bandwidth and data transfer.”
Monk added that memory capacity is a key benefit of the Oyster card.
"For example, the technology could offer discounts right across the different modes of transport in London," he said. "Current magnetic cards cannot provide the level of stored data that smartcards can.”
Officials expected Oyster to help reduce pressure on London transport during rush hour. A TfL spokesman said, "We see Oyster as the start of the end of endless queues on Monday mornings - people will be able to gain quicker access on to buses and through tube gates."
He also expects to see a decline in the amount of travelcard-related fraud and theft. "If someone steals an Oyster card we can deactivate it immediately and they are left holding nothing more than a piece of plastic."
Annual and monthly adult season ticket holders in the capital can use the card after registering and paying in advance over the internet or by telephone.
However, all annual and monthly ticket holders will be able to get an Oyster card from ticket offices and retail outlets later in the summer. All 350,000 annual and monthly ticket holders are due to be issued with an Oyster card within a year.
Oyster can be also be used on national rail within the six zones of greater London.
TfL is still in discussion with the train operating companies about integrating the Oyster card with a national rail scheme.