Could a smartphone replace your wallet?

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If you believe the pundits, your mobile phone will soon become an electronic wallet, as we take the next step towards a cashless society.

A trial of world-first technology is underway in Australia to see if smartphones can be used to replace debit and credit cards.

The three-month pilot program by Westpac and MasterCard will see debit card information securely programmed into a phone's SIM card to let users pay for goods by tapping a mobile phone at the cash register.

The SIM card operates like a credit card chip and users will be able to make purchases up to $100 at 82,000 terminals already available in Australian stores including Coles, 7-Eleven and JB Hi-Fi.

Matt Barr, head of innovation at MasterCard, said it's the first pilot of its kind using a technology within the phone. The pilot is using Samsung's Galaxy S 111 handsets, but if successful, the technology will enable SIM cards to be re-programmed online and put into other mobile phones.

"You want to buy a coffee, you launch the application on the phone, say you want to make a payment, you tap the phone to the terminal, and you're done. You want to buy something of high value, you can still use your phone, but you have to remember your pin," he told Today Tonight.

The technology is being compared to Google Wallet – an application that can be used with any US credit or debit cards on most phones. Google Wallet holds all of the items you would hold in a regular wallet such as offers, loyalty cards and credit cards and eventually they plan to add other items including boarding passes and theatre tickets, to name a few.

It's also being likened to Commonwealth Bank's (CBA) new iPhone payment system – an application called "CommBank Kaching", which was introduced late last year.  

The difference is CBA's technology is a cover device which you buy to attach to your phone, while Westpac's offer is in-built into the SIM card.

"What's unique about what we've done with Westpac is you don't need to buy any other hardware to enable the phone to make a payment," Barr adds.

Although experts warn that the trial needs to test the security of the system.

"The challenge is that the security side is not completely proven," Telsyte research director Foad Fadaghi told The Herald Sun.

MasterCard's Barr insists that a big part of the trial is to make sure all of those security issues are ironed out before it is released for a mass market.

"The fact is that if you lose your phone you can actually contact your telecommunications provider, they can cancel the phone for you. If you lose your wallet, you can't cancel your wallet – it's an additional layer of security on using the mobile," he said.

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