Credit cards could become a thing of the past after the internet giant Google announced a new application which will enable smartphone customers to pay using their Android device.

The new system, Google Wallet, is set to launch in the summer of 2011 and the company hopes it will revolutionise the payments industry.  Many major mobile phone providers are developing handsets that will allow consumers to pay for hundreds of thousands of goods and services with their phone.

Purchases made on mobile phones set to reach £383 billion by 2014

Google expects purchases made using mobile handsets to reach $630 billion (£383 billion) by 2014 compared to about $6 trillion of credit card payments made annually.

One of the main reasons that handset manufacturers and mobile phone companies are keen to take a share of the mobile payments market is because it opens the door to the multi million pound ‘local offers’ market.  Companies can send vouchers and special offers direct to consumers based on where they eat or where they shop if they use their GPS enabled smartphones to pay for goods and services.

The smartphones will feature ‘near field communication’ (NFC) which allows mobile phones to communicate wirelessly with credit card terminals.  Handsets with the built-in technology will allow consumers to pay for goods and receive a digital receipt quickly, shortening queues and speeding up the payment process.

Credit cards could well have a continued role to play – at least in the short term.  It may be some time before the technology reaches the UK as only Nexus S phones currently have an NFC chip.  The Independent also reports that ‘initially retailers could be limited to New York and San Francisco.’

Stephanie Tilenius, Google’s head of commerce and payments, said “We believe the shopping experience hasn’t yet been transformed by technology.”