Ping,swipe or wave,pay by mobile

Visa payWave,as the new system is known,will allow customers to pay for small items by swiping their smartphone on a reader. It has the potential to become the largest virtual wallet scheme of its kind in the world,the companies claim 8211; with Vodafones chief executive,Vittorio Colao,describing it as the next stage of the smartphone revolution.

However,technology analysts said companies have a long way to go before phones replace coins,paper money or plastic.

Mobile wallets that enable users to pay for goods and services by holding their phone against a reader are already available,but are used for very few payments.

Last year,Orange and Barclaycard released the Samsung Tocco Quick Tap phone,the first handset able to make contactless mobile phone payments in the UK. Users can top-up their pre-pay account and use the phone for transactions of up to 15.

O2,Google and T-Mobileall plan to launch similar devices in the UK,and high street chains,including Boots and McDonalds,have so far installed 80,000 contactless payment readers in outlets around the country. By the time the London Olympics begin,there are expected to be 100,000 contactless readers in use.

In Africa,where people are more likely to have a mobile phone than a bank account,these payment systems are already widely used. In the west,though,the take-up of mobile payment options has been patchy.

Sandra Quinn,of the UK Payments Council,said mobile transaction volumes remain low because consumers already have payment options,and are still worried about security.

Its a chicken and egg situation, she argued. Retailers and handset sellers are reluctant to invest in something unless they know customers will use it. But customers wont start using it until retailers install it and phone providers promote it.

Analysts suggest providers would need to offer incentives to encourage customers to adopt the new payment method.

Orange has started to do this,unveiling Quick Tap Treats for customers who pay with their phone in the restaurant chain Eat. Once mobile payments are more widely used,providers say they plan to offer loyalty schemes in the same way as Nectar or Boots reward cards. But mobile phones can only be used as electronic wallets if they are fitted with certain technology 8211; and,so far,few handsets in the UK have the near field communication capability needed.

At this weeks Mobile World Congress in Barcelona,the online payment provider PayPal said waiting for new phones to be released would take too long. It is promoting its own payment system,already accepted in Pizza Express restaurants,that allows users to pay a bill using a PayPal application download on to a phone.

An alternative to mobile payments 8211; mobile money transfers 8211; have proved more popular. Barclays says its new Pingit app,which allows customers to make payments to other bank accounts via text message,was downloaded 20,000 times in two days after its launch in late February. But mass adoption of mobile wallets is likely to take longer.

Mary Carol Harris,head of mobile at Visa Europe,said the goal is to allow customers to pay with mobiles regardless of who their bank or phone provider is.

But,so far,the banks,shops,telecom companies and phone-makers cannot agree on who will get the lions share of the lucrative customer data that mobile payments would generate.

2012 The Financial Times Limited