China Telecom mobile phone customers will be able to pay for purchases by tapping their 3G phones on point of sale terminals in Shanghai by the end of the year, the telco said yesterday.

The telecom operator and China UnionPay, China's sole domestic agency for cashless payments, have agreed to jointly launch 3G, or third generation, phones that will have this function by the end of this year.

Payment by mobile phones is set to be a popular 3G application and China Telecom's phones may be the first batch of handsets equipped with the POS payment function in China, analysts said.

The telco launched the 3G mobile payment service in Shanghai yesterday, which allow users to order concert tickets through 3G phones, for example. Users will receive a short message service to confirm the purchase and will see the cost of the tickets added to their mobile phone bill at the end of the month.

"Our plan includes launching phones with direct payment function and they will be ready by the end of this year," said Wang Shiwei, chief engineer at China Telecom's Shanghai branch. "After its launch, people can use phones to pay on all POS (point of sales) machines" just like debit cards. The phones may also be used on buses and on the metro later, Wang added.

Users can use the payment function by changing to a new SIM (subscriber identity module) card, which has a chip similar to that found in bank and transport cards. Paying by phone is common in Japan.

The revenue in the electronics payment market in China will reach 1.9 billion yuan (US$278 million) in 2009, a 30 percent annual rise, said Shanghai Telecom.

(Shanghai Daily May 27, 2009)