The theory is that your phone will soon become and electronic wallet, as we take our next step towards becoming a cashless society.

Now that your sim card is turning your phone into an electronic wallet, it seems you can wave goodbye to credit cards.

Westpac and MasterCard are trialing the use of mobile phones for debit purchases up to $100.

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“You want to buy a coffee, you launch the application on the phone, say you want to make a payment, and you tap the phone to the terminal, and you're done. You want to buy something of high value, you can still use your phone, but you have to remember your pin,” MasterCard's Matt Barr explained.

Barr says the pilot is using Samsung’s latest Galaxy S 111 handsets, but in future, the technology will enable sim cards to be re-programmed online and put into other mobile phones.

Seamus Byrne, Editor of product technology information website CNet Australia says that “it’s effectively a technology that just has this kind of special antenna built into your phone that means when you swipe it across an active magnetic unit, like a ‘paypass’, it is basically creating that moment where it creates the transaction.”

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According to Byrne “one of the really smart things about trying to get it working through a sim card is that you'll actually be able to swap the sim card when you buy yourself a new phone.”

Westpac's pilot program is hot on the heels of the Commonwealth Bank's new iPhone payment system - an application called CommBank Kaching introduced nine months ago.

When you wave your phone in front of a reader it becomes a payment terminal for purchases up to $100 in around 82,000 stores that take MasterCard PayPass.

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The difference is Commbank Kaching is a cover device which you buy to attach to your phone, whereas what makes Westpac's offer an Australian first is that the technology's in-built into the sim card.

“What's unique about what we've done with Westpac is you don’t need to buy any other hardware to enable the phone to make a payment,” Barr said.

America already has the Google Wallet - an application that can be used with any US credit or debit cards on most phones, in store and online. Google is aiming to bring it to our shores soon.

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Google Wallet holds offers, loyalty cards and credit cards like you have today in your regular wallet, and eventually they’ll also have transit cards, boarding passes, theatre tickets and much more.

With the new payment system we're carrying around our private banking information in our pockets, so the key concern is safety and security to protect us from our accounts being stolen.

“There’s a limit on what you can do before you do have to sign and put in a pin number, so there is some secure element there. But certainly a big part of this trial is that they want to make sure that they've ironed out all of those security issues before they release it for phones,” Byrne said.

CNet: Westpac and MasterCard trial SIM + NFC phone payment system

“The fact is that if you lose your phone you can actually contact your telecommunications provider, they can cancel the phone for you. If you lose your wallet, you can’t cancel your wallet - it’s an additional layer of security on using the mobile,” Barr concluded.

• Commbank's Kaching - www.commbank.com.au
• Google Wallet - www.google.com/wallet