Taiwan Mobile Co. Ltd. and MasterCard International Inc. have already started testing a mobile phone payment system in Taiwan, but competition to lure users will catch fire when the mobile phone operator's larger rival opens its trials with Visa.

Testing by Taiwan Mobile and MasterCard is already underway, with 100 users carrying Nokia Corp.'s 3220 model handsets armed with the MasterCard PayPass wireless payment system on board, the operator said Thursday.

The goal is to arm mobile phone users on the island with the ability to use their handsets for payments on small items. The Nokia mobile phones use Near Field Communication (NFC) technology for transactions, MasterCard said in a statement.

The companies are also testing E-Coupons sent to mobile phone users, which can be used when making purchases. The companies have teamed up with Taipei Fubon Bank, and hope to expand the service later this year.

Taiwan's largest mobile phone service provider, Chunghwa Telecom Co. Ltd, also plans to start testing a separate mobile phone payment system soon. The company has already signed on with the Visa International Service Association and Cathay Financial Holding Company on a system designed for small payments.

The companies will offer users a choice of the CHT9000 or CHT9001 business handsets made by High Tech Computer Corp. for wireless payments, and limit the amount of transactions to NT$3,000 (US$90.88).

On Thursday, Visa International Service Association and SK Telecom Inc. announced plans to introduce a mobile payment system using universal Subscriber Identification Module (USIM) cards for 3G (third-generation) mobile phones users in South Korea.

The IDG News Service is a Network World affiliate.