The Mayor of London and Transport for London (TfL) have agreed to allow London taxis to accept card and contactless payments.

Following negotiations with TfL, credit card companies have agreed to reduce the cost for drivers for card payment acceptance. This is expected to lower transaction fees paid by cabbies from up to 10% to 3% or less of the transaction.

Moreover, as per the agreed terms, customers will not have to pay any surcharge on their fare, with taxi drivers recouping transaction costs through a proposed 20 pence rise on the basic fare.

Subject to approval by the TfL board in February 2016, the fare change will be effective from April 2016 with all cabs to accept card payments from October 2016.

TfL COO for surface transport Garrett Emmerson said: "This is a very positive change for taxi drivers and for our customers. London is increasingly a cashless city, with people using cards to pay for all aspects of their daily life – including transport.

"We are seeing more and more people use contactless payments on our network, and mandating card payments in taxis will mean customers no longer have to consider how they might pay for a journey before getting into a taxi. It will also benefit drivers, who will see their services opened up to potential new business."