Those behind the new system say it is "faster and more convenient" than cash and more secure; payments, they claim, take less than a second.

Cardholders in seven postcodes in the capital should soon receive a letter from their banks asking if they want to sign up - those who do will receive new cards including the technology for contactless payments.

Today, Mastercard covered London's Millennium Bridge in images of cash and notes to celebrate the launch of its PayPass system, "paving the way to a cashless future", it claimed.

The system has certainly taken off overseas - so far, 16m PayPass cards and devices have been issued in 19 countries, and around 55,000 merchants have signed up for the system.

In the UK more than 1,000 retailers have signed up, including high-street names such as Coffee Republic, Krispy Kreme and Books Etc.

Quick payments

Oliver Steeley, head of strategy and business planning at Mastercard, said contactless payments in other countries had proved most popular in outlets where the consumer wanted to make a quick payment.

"Where we've had most success has been in places selling convenience items like takeaway food, places like pharmacies and convenience stores - pretty much everywhere where you get a peak at the middle of the day with lots of small payments," he said.

Mr Steeley said Mastercard had worked with Visa to ensure that technology for contactless payments was the same across the board, meaning retailers only needed one terminal and customers could use their cards anywhere.

Among the card issuers that have signed up to offer contactless payments is Barclaycard.

Its OnePulse card also includes an Oystercard element, which means commuters in the capital can use the same piece of plastic to pay for their coffee and newspaper in the morning as they do for their train journey.

The OnePulse, which works in the same way as Mastercard's PayPass, is already in use in the company's offices in Northampton and London, and in one retailer - a salad bar called Chop'd situated outside the bank's headquarters.

Invitation to apply

More than 3,800 customers who have pre-registered for the OnePulse cards will start to receive invitations to apply from next week, and cards will be sent out after that.

The cards are available to existing Barclaycard customers requesting an upgrade, as well as new customers.

The spokeswoman said there were no plans to start issuing the contactless cards as matter of course, and it would remain a "separate new product that people have to apply for".

"It's very much targeted to London and London commuters," she said. "We will be testing it, though, to see how it goes down."

The card providers' association, Apacs, has said that more than 5m contactless cards will be issued by the end of 2008, and will be accepted in at least 100,000 locations.

But in the short term, consumers who want to take advantage of the system will have to actively opt in by applying to their card provider for an enabled card, which means take up may be slow.

Security fears

A survey by cash machine provider Bank Machine suggests security fears may also dampen enthusiasm for the system, with 70% of consumers questioned saying they thought fraud was more likely on the new cards.

However, Mr Steeley from Mastercard said measures had been put in place to limit the potential risks.

Each card will have a reader in it, recording how many payments have been made since the last time the cardholder was asked for his or her Pin.

After a set number of transactions, determined by the issuing bank, the terminal will ask for the Pin. If the card is used at any point to make a chip and Pin payment the counter will be set back to zero.

Mr Steeley added that contactless transactions would be covered by the same part of the Banking Code that covers chip and Pin, so consumers should be able to claim any fraudulent payments back, as long as they have looked after their card.

Cash crash?

So will contactless cards spell the end of cash? According to Apacs, cash payments are already in decline, falling 14% over the past five years.

Two-thirds of the 23bn cash transactions made last year were for less than £5, so they could be replaced by payments using contactless cards.

However, 63% of all payments are still made with coins and notes. Apacs forecasts the figure will fall to 45% by 2014, but that is far from the end of cash.

Not even Mastercard is expecting contactless payments to kill off cash. Mr Steeley said he expected notes and coins to still be used on the high street, but "you might just need a little bit less of it in your everyday life".