Motorola and Mastercard in "credit card" phone trial

Motorola and MasterCard are working on mobile phones capable of secure financial transactions, such as banking or buying groceries with a credit card.

Later this year, a few hundred US residents will be testing two such product lines made by Motorola that use MasterCard's PayPass wireless payment system, according to Motorola.

The Motorola-MasterCard phones will have "the potential to be lifestyle-changing - in essence, your phone will become your wallet, key chain and your ID," Ron Hamma, a VP at Motorola, said in a statement.

The promised handsets, and the surrounding hype, revisit an idea that was much talked about a decade ago - that consumers could make purchases with mobile phones rather than carrying cash, coins, credit cards and bank cards. Instead of having to reach for a wallet or purse, the thinking goes, consumers could wave the phones over wireless readers, similar to the way a supermarket cashier scans items.

The idea fizzled out because wireless data networks were, at the time, too slow and porous. But both Motorola and MasterCard said new technologies developed over the last few years have changed the situation for the better.

Motorola will outfit the phones with Near Field Communication (NFC), a powerful and secure wireless signal with a range of just eight inches. NFC is used in "contactless" credit card readers, which are replacing traditional readers that require cards to be swiped, or gobbled up and spat out.

MasterCard conducted a nine-month trial of the technology, using phones from Nokia, last year in the Dallas area. These phones required an attachment with the PayPass chips inside. The Motorola phones will have the chips embedded, said Oliver Steeley, a VP at MasterCard.

At the same time, wireless carriers are showing new interest in what's known as "mobile commerce". Verizon Wireless has said it will let customers bill transactions made using a mobile phone's Net connection directly to a subscriber's Verizon account, instead of a credit card or bank account. Wireless messaging specialist Netpace, which created the technology behind Verizon's service, is currently in talks with Cingular Wireless, AT&T Wireless and Sprint, according to Netpace CEO Vajih Khan.

Ben Charny writes for CNET News.com