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When wireless industry experts consider the challenges of adding an electronic wallet to our mobile phones, the biggest issue they face is no longer the technology.

It's people — and specifically how we will react to having the power of a credit card folded into the circuitry of our favourite voice, e-mail and multimedia handset.

Next spring, three companies are launching a mobile payments pilot in downtown Toronto to examine how consumers will use cutting-edge technology that lets them wave a cellphone at the cashier rather than opening their purse or wallet.

Royal Bank of Canada, Visa and Rogers Wireless Inc. are working together to launch the trial, which will last about three months and involve at least 100 retailers and an as-yet-undetermined number of participants.

Several other trials have occurred in recent years, primarily in South Korea and Japan. But the Canadian project is the first to test the combination of a special mobile phone, new user-interface software, and encryption for transferring personal data over the air.

"This trial is state-of-the-art," says Mike Bradley, head of products for Visa Canada. "We do expect to see rapid adoption of pay technology over the next few years."

Mobile phones loaded with an electronic credit card have been in the works for a while. Visa, for example, has been working on developing secure payment services on mobile phones since 1999. The technology has always seemed like it is just around the corner.

But today it's still unclear how consumers will be affected, says Anne Koski, head of payments innovation for RBC.

"The value for the retailer is clear: They get people through their lines more quickly," she says. "But is there enough value-add for the consumer? The technology is sound, but the consumer is not asked to sign the transaction. So we really want to see if people are comfortable with it.

"New technologies like this take a while to catch on," she adds. "I have friends who still refuse to bank online."

Visa thinks one of the most reassuring elements of the cellphone credit card is that if the consumer loses the handset, access to the card is protected by a password code. In addition, the payment company offers a zero-liability policy if a card is used fraudulently. Eventually, the technology will give banks or the card issuer the ability to wipe financial data off a device that is lost or stolen.

The groundwork for electronic wallets is being set with the current rollout of so-called smart cards — credit and debit cards that store data on an embedded microchip rather than a magnetic strip. Canada's banks have issued nearly 2 million Visa smart cards to date, Mr. Bradley says; the number is expected to rise to 4.5 million by the end of this year, and to 15 million by the end of 2009.

The chips on the cards are almost impossible to counterfeit, Mr. Bradley says, and they allow cardholders to enter a PIN rather than a signature to finalize a transaction.

Visa recently began a marketing campaign to try to get cardholders comfortable with its smart cards, which are called Chip and Pin cards. Last month the company launched a 30-second television spot, dubbed the "Secret Service campaign," which shows a team of bodyguards keeping a Visa cardholder protected around the clock.

By adding a tiny antenna to these smart cards, Visa has developed a version of the card called payWave that will let consumers do contact-less payments by waving their card at a scanner.

The cellphone trial will adopt the payWave technology to let customers wave their phone at the cashier's scanner. It will also test a secure wireless process for loading each cellphone with its owner's credit card information from the bank.

"This is the first time we have ever put one of our financial applications on another form factor — a phone," says RBC's Ms. Koski.

The phones will run on the Rogers network and will be specially manufactured for the trial by Motorola Inc.

Phone companies see huge potential in adding credit cards to the phones they sell.

The actual wireless transactions will occur over networks controlled by Visa and the banks, but Rogers and other carriers will be able to customize the software on the phone and perhaps add other features, says David Robinson, vice-president of new business planning at Rogers Wireless.

Electronic wallets are just a natural evolution of the mobile handset, he adds. "If you can put it in a wallet or on a [key] ring, then I want it on the phone."

Standardization is critical, however, before new technology such as electronic wallets can be adopted. Phone manufacturers, for example, want to be able to turn out devices in the millions. And retailers want a single scanner on their counters that will read all types of credit and debit cards.

The major card companies have agreed on a two-way communication standard for their embedded chips and the scanners, called near-field communication, helping pave the way for mobile payments shortly, Mr. Robinson says.

The two biggest technical challenges are securing the wireless transmission of personal information, a process done with advanced encryption, and developing an effective user interface. Both issues will be studied carefully in the pilot project, Mr. Bradley says.