It’s only a question of time until you can use your mobile (iPhone) in order to pay for things in the shops, though getting there will require lots more work on transaction security, but developers are already looking at solutions which enable use of the device as a payment processing tool.

A recent example of such development is currently being tested in a New York store. It’s codenamed Square and involves a small plastic card reader which plugs into the iPhone’s headphone socket. Vendors can use this card reader to read the magnetic strip on the card, prices can be input on screen and customers can sign for their goods there (or, in future likely input their PIN code).

There’s a few nifty touches: customers can enter their email in order to be sent a receipt, which names the date and value of the transaction and also delivers a map showing you were the store was. If the trial is a success, then the system will be introduced to other stores, and may even end up making it possible for smaller vendors, market traders, for example, to take payments.

This isn’t the only such activity exploring use of an iPhone as a credit card device. Apple holds a patent on an iPhone ordering and payment system.

And another firm, Encore Payment Systems is enabling its merchants to process credit and debit card transactions through its secure network by utilizing an iPhone, iPod Touch or T-Mobile G1 over Wifi or 3G wireless connections.

The application is currently available through Encore’s sales team and is set up via a one-time installation process through a web browser. Upon installation the application icon is available on the home screen of the device for convenient future use.

Using the application, merchants can type the card information into the phone and the credit and debit card transactions are processed as "card-not-present" or "offline-debit" payments.

And in further development to this end, Innerfence are currently developing a system which will turn your iPhone into a terminal for taking payments.

Even Apple’s iFund partners are interested in this evolution. Representatives from the venture capital fund handling the $100 million iPhone developer ‘iFund’, Kleiner Perkins Caufield & Byers, took a look at yet another such solution, which is being developed by Billing Solutions last year.
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Truly, with all this activity, in the near term we’ll see iPhones (or an iPod touch) used as credit card payment terminals at sales outlets, and it’s only a few leaps forward from that until we see the devices replacing credit cards in their own right.

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