A new cash replacement card for transactions below £10 is to be launched in the first quarter of next year.

Squid card, a pre-loaded card that uses similar "tap and go" technology to Oyster, is aimed at retailers that handle high volumes of low-value transactions and who would usually refuse to process card transactions at such levels.

Using a radio frequency reader, the card will connect via the internet to a central payment engine that checks and authorises payment in two to three seconds - far quicker than most debit and credit card transactions.

Squid chief executive Adam Smith said that equipment installation and rental costs were similar to those of chip & PIN, but that transactions were much cheaper to process because the system was simpler.

Smith added Squid had secured backing from a number of major retailers and would be rolled out across London and another major city in the first quarter and then to other cities over in the course of the year.