Bank of America Corp, the largest U.S. consumer bank, and Visa Inc, the world`s largest payment processor, plan to begin a test program next month that lets customers use smartphones to pay for purchases in stores.

The program, to run from September through the end of the year in the New York area, is the biggest step yet by the two companies toward creating a "digital wallet" with a host of financial capabilities built into the latest, most sophisticated mobile phones.

The program will allow select New York-area employees and customers to install small chips, supplied by Visa and its technology vendors, in their smartphones that emit radio signals over very short distances.

Customers would then "bump" their phones with point-of-sale devices in stores -- actually they need only wave the phones near the devices -- and their bank account data would be collected and their purchases completed.

The program will allow select New York-area employees and customers to install small chips, supplied by Visa and its technology vendors, in their smartphones that emit radio signals over very short distances.

Customers would then "bump" their phones with point-of-sale devices in stores -- actually they need only wave the phones near the devices -- and their bank account data would be collected and their purchases completed.

While mobile payments have been used for years in countries such as Japan, the United States has been much slower to adopt the technology.

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

BDST: 1715 HRS, 21 August 2010