Shanghai Pudong Development Bank (SPDB) and China Mobile have launched a near field communication (NFC) service which allows customers to use their smartphones to make mobile payments, the two companies announced late last week at a press conference.

The collaboration marks the first time a bank and a telecoms company have teamed up to offer such a service on the Chinese mainland, although media reports say that China CITIC Bank and China Unicom are at work developing a similar service. Alipay, the third-party payment service provider operated by e-commerce titan Alibaba, is also reportedly creating an NFC application for use on public transportation services.

NFC refers to a set of wireless telecommunication standards that enable smartphones and other devices to transmit data when placed in close proximity. The service from SPDB and China Mobile lets customers with NFC-enabled phones and NFC-SIM cards access their bank accounts via their handsets to pay for transactions at mobile point-of-sale locations with participating businesses. Customers can also use the service to transfer money by bringing their mobile devices into contact.

According to a recent report from data provider and consulting firm Analysys International, China's mobile payment industry handled 74.2 billion yuan ($12.13 billion) in transactions during 2011, up 67.8 percent compared with the previous year. The report also predicts annual turnover to hit 223 billion yuan for 2013. However, mobile payments facilitated with NFC technology equaled just 4 billion yuan during 2012, the consultancy's figures show.

Zhang Meng, a mobile payment analyst at Analysys International, told the Global Times in an interview Sunday that growth in this corner of the market has been slowed by the complicated business chain needed to support NFC-backed services. Mobile phone manufacturers, banks, mobile carriers and retail businesses must all be committed to promoting NFC in order for related services to reach their full potential, Zhang explained.

Zhang went on to say that NFC security should not be an issue, as bank account information will be contained on an encrypted chip; although more cooperation from retailers is still needed to attract customers.

Currently, there are six handsets which support the NFC-backed service from SPDB and China Mobile. The service is free aside from a one-time charge of 10 yuan which covers SIM card replacement.