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The mayor of London and Transport for London have confirmed they will require all London taxis to accept cards and contactless payments from October 2016.
The plans follow on from a public consultation earlier this year where 86% of respondents backed proposals for card acceptance, with 68% also wanting to see contactless payment options.
TfL said it has negotiated with the credit card industry to bring down the cost of accepting card payments for drivers from 10% to 3% of the total transaction.
TfL said a number of card payment operators are working on devices to take payments - which will have to be approved by the London transport authority - ahead of next year's roll-out. These are:
Under the plans, customers will not pay any surcharges on their fares. However, there is a proposal to increase the basic fare by 20p, from the current £2.40.
The fare increases will need to be approved by TfL's board in February, as part of its annual taxi fares revision. If accepted, the new fare charges will come into force from April 2016.
"This is great news for the millions of people who use London's world famous black cabs," said mayor of London, Boris Johnson.
"This move will boost business for cabbies and bring the trade into the 21st century by enabling quicker and more convenient journeys for customers," he added.
The London Assembly welcomed the move, having recommended introducing card payment options into cabs in a report earlier this year.
"Passengers will no longer have to worry about carrying cash and it is very positive news for drivers," said Valerie Shawcross, chair of the London Assembly Transport Committee.
"We heard evidence from New York during our investigation, where the introduction of card payments boosted business - so this gives licensed taxi drivers a golden opportunity, in a hugely competitive market," she added.
"The elimination of customer surcharges for card payments and the reduction in transaction fees paid by drivers should all add up to a better, more efficient service for customers."
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