I don’t know how many people know this, but the balances on Oyster cards are refundable[0], so it is possible that they would indeed need to pay it out.

[0] https://tfl.gov.uk/fares/refunds-and-replacements/oyster-pay...

And the cards themselves are worth a £5 deposit. (Clever IMO - ever seen one littered?)

Sort of. Before February 2020, most (but not all) Oyster cards had a £5 deposit. However, Oyster cards issued since then do not have a deposit (there is instead a £5 fee for the card).

For older Oyster cards that have a deposit, you can still reclaim that £5.

Oh interesting, thanks for the correction. Will be interesting to see if I start to notice them when I (and people who might drop them) are out more.

The fee/deposit payment is part of it (prevention, it not seeming a disposable item) but with a deposit (there's no good way to say this..) there's also the incentive for the homeless or otherwise desperate to clear them up, since there's some guaranteed value. (Which could be a bit less than £5 due to negative get-me-home-at-night balance, but I don't think it's allowed to go as far as -£5, so a card with a deposit on it is always an asset.)

Even so, the proportion of refunds paid because someone requested one, vs. the number of cards that were lost/destroyed in the laundry/fell through the cracks means that they could keep some fractional amount on hand for those potential payments, and transfer the rest as "found money" to an operating account.