Bank of America, Visa to Test Smartphone Payment Program

Bank of America Corp (BAC) and Visa Inc. (V), the world's largest payment processor, will begin a test program next month that allows consumers to pay for purchases in shops using their smartphones.

The program will run from September through the end of 2010 in the New York area, Reuters reported.

The program will allow certain New York-area customers and employees to install small chips in their phones. These chips would be able to interface with point-of-sale devices in stores to process purchases with the users' bank account data.

Customers would just need to wave their phone in front of the point-of-sale devices to make a purchase.

The use of phones to make purchases is viewed as a major step forward in financial technology, and some think it could become the main way of making everyday purchases.

"We see this as a critical capability given the increasing acceptance and adoption of bank services on the phone," Laurie Readhead, Bank of America's head of electronic commerce, told Reuters.

Visa will run a similar pilot program with US Bancorp (USB), starting in October.