An e-payment firm has vowed to take on the major card-issuing banks with an 'electronic purse' for low-value transactions.

SQuidcard, a subsidiary of Nucleus, will begin trials of its contactless payment card and eMoney network this June in northwest England and inside the M25, with a national roll-out planned for 2008/9.

While traditional Visa and MasterCard credit and debit cards are the payment method of choice for consumer transactions over £10, cash is still the primary instrument for sub-£10 purchases, which amount to over £200bn a year in the UK.

Consequently, the card issuers have committed to developing contactless cards for low-value purchases which can be pre-loaded and do not require chip-and-Pin security.

However, the fees levied by the traditional card networks, which can be as high as 18 per cent, make them economically unattractive to retailers which deal in low-value purchases, according to sQuidcard managing director Adam Smith.

The company has promised that its fees will not exceed 1.5 per cent, which may well be less than it costs a retailer to handle cash.

SQuidcard can drive down its fees partly because it uses a web-based network, rather than the legacy networks used by traditional card issuers.

The sQuidcard is compatible with Mifare card technology, so a combined transport card and e-purse is viable.