The United States moved a step closer to using mobile phones for financial transactions with MasterCard's launch of the PayPass wallet.

The payments franchise partnered with handset maker Nokia and convenience store chain 7-Eleven in 2006 to allow consumers in Dallas, TX, try out mobile phones that are Near Field Communications (NFC)-enabled for contactless card payments. The credit card company got good feedback and now it's going national.

"MasterCard announced that it would be doing mobile payments so it looks like the big companies are all heading in the same direction and plan to enter mobile," said David Chamberlain, principal analyst for wireless at In-Stat, a Scottsdale, AZ-based market researcher. "It looks as though the major players all agree on NFC chips embedded into phones."

To activate their NFC-enabled phone for PayPass, users have to make a one-time request to their bank to register for the service. The chip management platform then sends a message over the wireless carrier network which automatically loads and activates the PayPass application inside the phone.

The PayPass wallet application can be password-protected so that a lost or stolen handset cannot be used to make payments.

MasterCard's announcement sparked reason for research.

An In-Stat study found that depending on technology, commercial and marketing issues, somewhere between 8 million and 30 million customers in North America will be using NFC-based contactless payments by 2012.

In addition, the study found that more than 34 million mobile phones may be used for other financial applications such as online banking by 2012.

"There is evidence that the U.S. market may overcome a crucial issue -- technology incompatibility -- and make progress during 2008 toward contactless payments using cell phones," Mr. Chamberlain said.

"There is a general agreement that the current generation of mobile banking services is an important first step toward accomplishing that goal," he said.

The study also found that the major companies that are involved in bringing mobile finance to North America have similar goals and understanding of the current market. This is critical to the development of mobile banking and payments.

"We also did a survey of end users and they said that they are very enthusiastic about this," Mr. Chamberlain said. "Their biggest concern is additional fees. I think that there will be approximately 9 million users of MasterCard's mobile PayPass within 4 to 5 years."