When smart cards hit the headlines, it is usually because they are part of a new round of trials. But from the end of next month, commuters in London will get their taste of the real thing for the first time.

As part of a new transport initiative, monthly and annual ticket holders in the capital will be issued with credit-card-sized smart cards, which they will be able to use on the underground, buses and trains across London.

Transport officials claim the smart cards - known as Oyster cards - will slash queues for tickets and make it faster for commuters to go through gates and on to buses. Different ticket types will be made available to smart-card holders during the year. "They will speed up journeys. When you are entering the tube, you tap your card on the reader and the gates will open. It's very sensitive," explains a Transport for London spokesperson. There is no additional charge for the smart cards and the validity of the tickets they hold can be extended online or over the telephone.

The new London smart cards have been designed by TranSys, a consortium of technology companies. The consortium's marketing director, Nicole Carroll, says the personal information held on the new smart cards is minimal and she insists the data is secure and would not be passed on to a third party without consent. The consortium has ambitious plans to introduce further applications. "We are going to do a number of tests to see what works in the customer domain. It is very likely that your Oyster card will eventually have credit card functionality and an electronic purse. You will be able to use your smart card to buy a coffee and a newspaper."

Outside London, other local authorities across the country are testing smart cards with transport applications. Cornwall has more than 40,000 smart cards (known as Cornish Key cards) in circulation, which can be used for concessionary fares on buses or for paying car park charges. The cards are also being used as replacement library cards. Roy Cosway, corporate IT services manager for Cornwall county council, believes there are a host of applications that could eventually run on the Cornish smart cards. "If it's convenient and helpful to use smart cards, people will do so."

Aside from transport, smart cards are seen by local councils as a way of making their services more accessible. The idea is that individuals will be able to authenticate themselves online with their cards and then, for example, pay their council tax electronically.

But not all smart card applications are finding support from the public. Southampton city council recently tried an experiment where people were encouraged to report housing repairs online at public kiosks by using their cards. The technology worked but the take-up levels were poor. "The kiosks have not been successful," admits Rob Gair, SmartCities project manager for Southampton city council. "We had chewing gum and coins stuck in the smart card slots. People would be just as happy to pick up a phone."

Nevertheless, Southampton's smart card initiatives are reported to be working well as borrowing and membership cards in libraries and leisure centres; in June, pupils at Bellemoor school will be able to use smart cards to pay for school meals. If they eat healthily, they earn loyalty points that can be spent at local shops.

With the number of disparate local council smart card initiatives mushrooming, the government has announced it is launching a £4m national smart card project to develop policies in England. The project will be driven by a small partnership of councils including Bracknell Forest borough council, Southampton city council and Cornwall county council. They intend to publish a best-practice guide and a starter pack, to enable other councils to introduce smart card schemes quickly and cost effectively. Another goal is to try to create and promote common smart card standards so certain applications could be used across the country. For example, people in Cornwall might eventually be able to use their Cornish smart cards to pay for car-parking in the north of England.

However, before they tackle the thorny issue of common standards, the national project team knows that smart cards have to prove they can successfully handle standard applications on a large scale. Which is why a lot is resting on the introduction of smart cards for London's commuters.