The 10 local authorities selected to pilot the youth smart card are awaiting direction from the department on what form the cards will take.
It has invited each authority to nominate a "champion" to work part time with civil servants to develop solutions for the scheme. This arrangement is expected to last from September to November.
The Government wants the pilots to be based on a single electronic system, to enable consistency. But negotiations with a national bank have now fallen through, Young People Now understands.
Transport for London has also pulled out.
The main difficulty is that the regulations governing banking practice do not easily accommodate the concept of the scheme. The challenge facing the department is adhering to banking regulations while still meeting young people's needs.
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