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The Oyster card is a contactless smartcard, with a claimed proximity range of about 10 cm. The scheme is operated by TranSys, and is based on Philips' MIFARE Standard 1k chips, provided by Giesecke & Devrient and SchlumbergerSema.

The Oyster card may have been inspired by Hong Kong's transport system, which uses the similar Octopus card. As with the Octopus card and other pay-as-you-go smartcards, also notably in Japan, there is the potential for future expansion of the Oyster card to act as an e-money payment system.

Travellers touch the card to a distinctive yellow circular reader (a Cubic Tri-Reader) positioned on automated barriers at London Underground stations to 'touch in' and 'touch out' at the start and end of a journey (contact is not necessary, but the range of the reader is only a centimetre or so). Tram stops and buses also have readers, on the driver's ticket machine or, in the case of articulated buses, near the other entrance doors as well. Oyster cards can be used to store both period travelcards and bus passes (of one week or more), and a pay-as-you-go balance.

The system is asynchronous with the most up-to-date balance and ticket data held electronically on the card rather than in the central database. The main database is updated periodically with information received from the card by barriers and validators. Tickets purchased online or over the telephone are "loaded" at a preselected barrier or validator.