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Beginning in March, mobile-telecommunication company Vodafone Group will offer its U.K. customers the ability to use their mobile phones as a type of mobile credit card for making small purchases online.

Users can use the m-pay bill service to buy items priced from $0.07 to $7 over the Internet or using a WAP phone, Vodafone spokesperson Janine Young says. The service will charge the purchases to users' phone bills or deduct the charges from their prepaid accounts, Young says.

Vodafone contracted third-party software company iPin to develop the mobile-payment system and will use the Silicon Valley-based company's e-Payment platform, Vodafone and iPin say in separate statements.

Payment is authorized by a user name and password for Internet purchases and a PIN number for WAP purchases, the companies say. When users make purchases on the Internet, they do not need to have their mobile phones with them, Vodafone says.

Vodafone competitor British Telecommunications announced last month that it is working with iPin to develop its own eWallet for its BTopenworld Internet customers.

Mobile Wallet

Vodafone also announced in January that it had begun trials of a global payment platform, or m-wallet service, over mobile devices in Germany and Italy as well as in the U.K. The m-pay service is a "totally separate service from m-wallet" and Vodafone has no plans to offer the m-pay service outside of the U.K. anytime soon, Young says.

Items and services that can be bought using m-pay include mobile-phone ring tones and icons, entertainment and financial information, online games, location services, music, news, sports information, ticket bookings, travel information and reservations, and weather information, Vodafone says.

Vodafone has already signed up 50 companies to offer services and products through m-pay, including individual Web sites like iStrat, Young says. For example, through iStrat, the London soccer team Arsenal Football Club will let fans watch video clips of goals and match highlights over its Web site, Young says.

"Many customers are used to charging things like ring tones over SMS [Short Message Service], but SMS is limited on what you can charge. M-pay offers complete flexibility, for example you can buy both a ring tone and a music file coupled together," Young says.

Credit Card Crowd

Vodafone is aiming the service at customers who either don't have credit cards or who don't like using their credit cards for making small purchases, Young says. "We have no plans in the immediate future for offering products like CDs or books over m-pay, because quite frankly, credit cards are more suited for making those larger types of purchases and customers feel more comfortable using their credit cards in those cases," Young says.

When Vodafone launches its m-pay service in March it will have competition from Paybox.net, which began in Germany in May 2000 and is now operational in the U.K., Austria, Spain, and Sweden.

According to Paybox's Web site, it has 500,000 registered users and 6,500 merchants across Europe, and has the advantage of not being tied to a particular network. One of its merchants is the Circus Restaurant and Bar in London, Paybox says.

All transactions are conducted over a secure GSM network so only a mobile-phone number is entered onto the Web when shopping online, the company says.

When Paybox members use their mobiles to pay for a product or service online or offline, they are contacted with an SMS. Users then reply to the message with a PIN, which authorizes the transaction, and the amount is debited from their bank accounts, Paybox says.

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