Mobile phone payments are expected to reach £700 billion by 2014. (Photo credit: Ed Yourdon)

T-Mobile, Orange, Vodafone and 02 have announced plans to collaborate on a system which will allow their customers to make retail payments with their mobile handsets. The new “wave and pay” system uses a technology called Near Field Communications (NFC) to enable quick and easy payments simply by waving an NFC enabled mobile handset next to a suitable transceiver in a shop, much like a smart card system such as Transport for London’s Oyster.

NFC technology received a major boost earlier this year when Google announced it would support it in the latest release of its Android mobile operating system, and the system is already widely used in countries like Japan and South Korea.

Mobile payments can offer significant benefits for retailers since it reduces the amount of effort required by the consumer to make a cash-less payment and can increase the volume of small and impulse purchases. For example, somebody might not be willing to pay for a newspaper or a cup of coffee with their debit or credit card, but simply being able to pay via their mobile handset without having to enter a PIN and wait for the payment to be processed can make the transaction faster and easier.

NFC payments will make up a third of the £700 billion in payments expected to be made through mobile phones by 2014, according to IE Market Research.

Tom Alexander, chief executive of Everything Everywhere (which now owns Orange and T-Mobile), said the new system would also “help advertisers reach their customers on the move, and help banks provide their clients with an easy and convenient way of making payments.”

The participating networks say that the new service will be available for use by UK business early in 2012.

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