The companies claim their joint UK customers will be able to use their handsets to pay for goods and services at retailers using Near Field Communications (NFC) within three years.
NFC, also commonly referred to as "contactless" technology, is a short-range high frequency wireless communication technology that enables an exchange of data between devices as far as four inches apart. The technology is already very popular in Japan and South Korea and has been for some time.
Both companies are launching co-branded products and services that they claims will "be the biggest revolution in payments since plastic cards were introduced over 40 years ago."
The new partnership will include other contactless services such as ticketing, transport and rewards.
MasterCard will provide the payment capabilities for the transactions.
“There has been a lot of talk about mobile payments and now it’s going to become a reality for our customers," Antony Jenkins, CEO of Barclaycard said.
In late 2007, rival O2 UK, part of Spain’s Telefónica launched Europe’s largest pilot of NFC technology on mobile phones where consumers used their handsets to pay for purchases and for travel around the British capital.
Barclaycard was involved in the six-month pilot, which found that users will buy phones equipped with mobile wallets if offered the choice. The findings also showed that nine out of ten trialists were happy using NFC technology on a mobile phone and 78 per cent said they would be interested in using contactless services if available.
Telefonica-owned O2 believes the future of contactless payments in the UK will become mainstream within five years, whereas competing operator Orange believes the reality of mobile payments will be sooner. "I believe that all our UK customers will be able to use their mobile phones to pay for everyday items within three years,” said Jenkins.