"O2 opens Wallet to enter mobile payments race"

O2 has announced a smartphone payment system, called O2 Wallet, to rival Barclays, Google and PayPal.

O2's Wallet app promises to be 'seamless and secure' 

The app can transfer from £1 to £500 between mobile phones but does not yet let customers buy items in shops.

Instead, it uses a barcode scanner to allow users to search for a product online, find the lowest price and purchase it via the phone. The network provider has signed deals with more than 100 retailers, including Debenhams, Comet, Sainsbury's Direct and Tesco Direct, who will now accept payments on their website from the service.

O2 said they would include near field communication (NFC) technology, which allows people to pay for goods by touching a phone against a reader, in the near future.

The system requires a user to set up an O2 Wallet account and load money onto it via a credit or debit card. From there, money can be sent between accounts instantly or used to shop online. It is not linked to a user's mobile phone bill, but the service is available to everyone, not just O2 customers.

O2 is the latest in a string of companies to launch mobile payment systems. Barclays launched its Pingit app, which transfers money between bank accounts, earlier this year, and online payment service Paypal's app can send money to other PayPal users.

Google's NFC service, Google Wallet, has launched in the US and is expected in the UK in the next few months.

James Richards, director of mobile at Intelligent Environments, a banking software provider, said businesses were rushing to enter the mobile payments market. "Consumer appetite to use the ever-ubiquitous mobile device to make payments and manage money is alive and kicking," he said.

Intelligent Environments said around half of smartphone owners would make NFC payments if the service was available. "Businesses need to provide compelling and intuitive mobile applications that bring convenience and simplicity to consumers' lives,"