Plans to transform Transport for London’s pre-pay Oyster Card scheme into a much wider "e-money" system have been sent back to the drawing board after the organisation failed to agree terms with a financial partner.

TfL wants to use the cards, which are currently used by 5 million commuters to buy travel on London’s tubes, busses and trains, as the base for a much larger "electronic wallet" network.

The starting point would be to extend the Oyster system so that the cards could be used to buy small items such as newspapers and pints of milk from newsagents and other retailers, something which TfL had hoped to achieve this year.

TfL had also hoped that as train companies took up the Oyster system, it would extend out of the capital. The company has also held discussions with a division of the internet giant eBay, in a move that could see Oyster Cards, which can already be topped-up on the web, become a method of payment for other online goods and services.

Today TfL denied it had pulled the plug on its ambitious ideas, but admitted that technical and financial partners had not yet provided an acceptable blueprint that would make the system acceptable to retailers without carrying a risk to TfL.

"TfL is a public transport provider, and while we are very keen to extend the Oyster system, we need to be certain we can run it at a profit," a TfL spokesman said.

"We think we need to lock the boffins in a shed and get them to come up with a solution that works.

"The financial and technical ideas that we have seen so far have been too complex and we have not progressed as far as we would have liked."

Britons have already shown themselves to be quite comfortable about paying with plastic, with a huge advance in debit-card spending on the high street and web in recent years, according to Apacs, the payment industry body.

Hoping to cash in on the trend away from notes and coins, TfL last year advertised to find a Financial Services Authority-regulated partner that could provide and integrate the technology for the new e-money system.

Discussions with several groups followed, including Barclays, the banks and Paypal, the online payment system owned by eBay, the internet-based auction house.

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