Smartphones could soon become an even greater part of our lives as networks join forces to let us pay for high street goods with our mobiles.

The battle to dominate the market for "virtual wallets" is heating up, but with it come concerns about how thieves and fraudsters could take advantage.

Britain's big-three mobile networks - EE, Vodafone (LSE: VOD.L - news) and O2 - are creating an opt-in service that will allow all bank, credit and loyalty card details to be stored on a phone SIM.

The customer will be able to swipe it on a card reader in a shop and instantly pay for goods.

David Sear, chief executive of Weve, the company managing the project, said: "You'll be able to pick up your goods from the counter - your sandwich or whatever it might be, on a small transaction - and simply swipe your phone, rather than having to get your card out of your wallet."

He is hoping to get retailers to sign up later this year, with the promise of advertising opportunities.

Stores will be able to send special offer alerts to customers' phones as they walk past in an effort to tempt them in.

Google (NasdaqGS: GOOG - news) , Barclays (LSE: BARC.L - news) , Mastercard and Paypal have all come up with their own versions of the virtual wallet, but they have not caught on in the UK.

The contactless payment market as a whole has yet to take off, with only 6% of people in the UK having made such a transaction with a credit or debit card.

Bryan Glick, editor of Computer Weekly Magazine, describes it as a chicken and egg situation.

He said: "Retailers aren't going to offer this as a means of paying unless they know they're going to use it, but people aren't going to use it unless they know there are a lot of retailers they can use it at."

As for security, the new system will have a limit on how much can be spent on a phone without entering a Pin code.

However, cyber security expert Jason Hart said he would take further precautions before using it - including having his smartphone, and the payment system itself, password-protected.


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