Unused 拢321m trapped on dormant Oyster cards 鈥� and time may be running out to get it back
This article by , Professor of Business History and Bank Management, and , PhD Candidate; both of 黑料不打烊 Business School, was originally published on . Read the .
It is 15 years since Transport for London (TfL) launched the Oyster card on London鈥檚 buses and tube trains, but Oyster hasn鈥檛 had a very happy birthday.
Instead of cake, candles and raised glasses, news broke that money trapped on dormant Oyster cards amounts to 拢321m, a princely sum that has effectively been loaned, interest-free from the public to TfL. This exists as credit on cards that haven鈥檛 been used for at least a year 鈥� either lost, damaged, abandoned, or stashed away.
To followers of Oyster-nomics, this is just one more episode in a marked decline affecting Oyster and similar top-up based systems. More and more cards have been slipping into disuse, while the percentage of journeys using Oyster has plummeted. Where did these troubles come from, and might the so-called cash mountain be the final straw?
Oyster vs Octopus
To understand Oyster鈥檚 problems, we need to take a look at its history.
London was not the first world city to introduce labour-saving methods on its public transport, and there have been many attempts to use technology to ease the passage of commuters cramming into buses and trains. In the 1960s, the Japanese launched a cardboard ticket with a on the back. The system is still used today, including on some British railway lines and the Mexico City metro.
In Hong Kong during the 1990s a diverse group of companies collaborated to develop Octopus 鈥� a payment card with a chip that dramatically reduced the city鈥檚 use of cash. Initially, the card solely served the city鈥檚 vast transport network 鈥� a direct forerunner of Oyster 鈥� but slowly expanded to include convenience stores, fast food restaurants and more.
By , more than 10,000 Hong Kong shops and service providers were accepting Octopus payments from 34m cards 鈥� accounting for 15m transactions a day. These corresponded to a daily spend of around HK$194m (拢18.7m).
The Oyster card seems brittle by comparison. While Octopus morphed into a contactless, stored value smart card capable of online and offline transactions, Oyster remains a glorified travel card. TfL oversees every year, so have easily had the influence and financial muscle to help develop Oyster if they had wanted. Predominantly, they have chosen not to.
At one stage there were ambitions to expand the Oyster network to Britain鈥檚 ATMs, so that customers would be able to top-up at any hole-in-the-wall. But in the course of , interviewees in the banking sector suggested it was political infighting in LINK 鈥� the sole ATM network in the UK 鈥� that kept the plans on the shelf, rather than any technological or commercial concern. A clear missed opportunity for Oyster to develop, Octopus-esque, and establish similar schemes across the country.
As it is, while some global counterparts have evolved to keep up with the new applications of contactless technology, Oyster has been touching in and out the same way since 2003.
Going for gold
Perhaps unexpectedly, the 2012 London Olympics dealt the Oyster card a body blow. Preparations for the games included plans to make Olympic sites in a bid to cut queues and stop criminals targeting visitors.
After much lobbying, this led to TfL starting to accept EMV payments. 鈥淓MV鈥� 鈥� 鈥淓uropay, Mastercard, Visa鈥� 鈥� refers to technical specifications which, within specific guidelines, make chips in payment cards and point-of-sale terminals compatible. This allowed contactless bank cards to be used instead of Oyster, initially on London鈥檚 .
By the end of 2013, London鈥檚 entire network of buses, tube trains, trams, metropolitan rail lines, and TfL-operated river boats was open to EMV payments, and in 2014 TfL doubled down by banning cash payment for bus fares. At the time, fewer than 40% of the 96m debit cards and 58m credit cards in the UK were contactless, but by the end of 2017, 70% of all payment cards had contactless capabilities. Similar trends were expected in the wallets of many of London鈥檚 15m or so annual .
Since the London Olympics in 2012, Oyster travel has dropped by 20%, while EMV journeys grew from 鈥� a factor of more than nine. The number of unused Oyster cards doubled between 2013 and 2017 from 27m to 53m. As for the cash mountain, that鈥檚 been growing by an average of 25% per year since 2014, from 拢123m to the whopping 拢321m now quoted in the press.
An Oyster with no pearl
In effect, punters have loaned TfL this money, interest-free, and there鈥檚 no guarantee it will be fully returned. When breaking the news, Liberal Democrat London Assembly member Caroline Pidgeon stated that it was 鈥渢ime TfL devoted far more time and energy telling the public how they can get their own money back.鈥�
But as with energy companies, TfL has no financial incentive to persuade the public to withdraw their balances. Gas bills at least are usually large enough to jerk the claimant into action, whereas Oyster balances are spread across 76m units (73% of which have lain dormant for a year or more), each containing an average of . One solution would be to imitate airlines and air miles 鈥� TfL could set a deadline by which to withdraw dormant money, or lose anything that goes unclaimed.
This dormant money has set off alarm bells across the pre-paid industry, and shows how non-financial organisations can heavily affect the way payment methods develop. In this case the bargaining power clearly lies with the transport operator (TfL) and not the user as, regardless of people鈥檚 preferences, they have to conform to the operator鈥檚 choice of payment method. Whether Oyster stays or goes will depend on TfL鈥檚 strategy, not on benefits to users.
Nevertheless, this is just one narrative in a much wider story: cash transactions are digitising, payment methods proliferating, and top-up systems like Oyster must evolve quickly or face extinction. Advances barely on the horizon a few years ago are now setting the industry standard, and the Oyster card has spent 15 years in stasis. One day soon it may be touching out for good.
Publication date: 17 July 2018