The reliance we have on our mobile phones is only going to increase in the next five years, as the world of mobile payments becomes a very attractive market for many financial institutions. If you’re in possession of a smartphone, you are now able to use it not only as a phone, but a handheld gamer, constant newsfeed…and it’s become your wallet too!

Mobile payments come in many forms especially where buying goods online comes into play, as users are able to type in your phone number and your mobile account gets billed via SMS, or by using direct mobile billing where a username and password are assigned to your number. Where available on the web, these services have become increasingly popular in the Asian and European marketplaces. Just watch out for the spam texts you might get as a little thank you for your transaction!

Paying for goods and services from your phone bill is becoming a highly lucrative business for service providers, as the price of goods often increases for users wishing to pay via their mobile. If this form of payment is necessary online, users have been found to use this as another form of temporary credit card if the funds are not available from the bank.

We can see that those short of cash for an online payment might throw it on their mobile statement and worry about it next month, however, where mobile payments are becoming really revolutionary in terms of the way we live our lives is in the Near Field Communication (NFC) area. This is where mobile users can leave their wallet at home and swipe their NFC-enabled smartphone over a reader device to pay for their items.

The new “mobile wallet” is being advertised as the cool, new and fast way to do banking, and the public are certainly listening. The total value of transactions carried out by mobile payments, online or in person using NFC, in the past 12 months is valued at USD $240 billion. Mobile payment-specific exhibitions are popping up all over the world in 2011 and this is due to be a topic of great focus for the popular Mobile World Congress in Barcelona, in 2012.

Android is currently the only operating system to release NFC-enabled devices, which use Google Wallet as their portal for payment. The uptake of this type of technology will be clear to see later in the year, especially if the next iPhone launches with an NFC chip.

Naysayers argue that a likely by-product of the Google Wallet phenomena is the feeding of Google’s ‘smart advertising’ database, where it gleans all the information it can by peering in on your personal transactions, emails and the rest, then advertising to you accordingly. This is probably true, so is it something that users have a problem with?

As well as having Google Wallet available to them, Android users will also soon have PayPal to use too, as the funds-transfer company have just announced (13th July 2011) that they will be integrating NFC payments into their Android application.

PayPal’s app is a pretty quick and neat way of passing money between individuals, as well as being a payment option for goods and services. Once two mobile phones are logged into the app, you can transfer money between the phones by touching them together and waiting for them to vibrate.

From the other end of the spectrum, Square have cornered a different angle of the marketplace – where users who download their app can receive credit card payments by hitching up a little “swipe” dongle to their phone (pic here! http://www.intomobile.com/2010/10/24/square-credit-card-reader-is-now-a-go/screen-shot-2010-10-24-at-6-32-46-pm/ ). This slots into the headphone jack of an iPhone or an Android device, connects to the Square app, the buyer confirms payment by signing with their finger on the touchscreen and hey presto, you’ve made a sale!

Somehow it seems though that Square might have got this mobile payments thing the wrong way round. Instead of smartphone users wanting to receive credit card payments on their phone, surely they want to make them instead? If small businesses want to start accepting NFC, they might need something slightly more robust and cheaper than a smartphone (also something not-so-loyal employees aren’t likely to want to take from you!).

So, next will we even need our car keys, or will our smartphones be able to unlock vehicles in the future? Watch this space!