Three of the top U.S. mobile phone operators -- Verizon Wireless, AT&T and T-Mobile USA -- have formed a venture known as Isis, which will build a national mobile payments network, Reuters (News - Alert) reported.

Countries such as Japan have had mobile payment systems for years that allow consumers to wave their phone at a terminal to pay for items such as train tickets. But such services have been slow to take off in the United States where only about 150,000 merchants accept contactless credit cards that can be waved close to a payment terminal by the consumer instead of being swiped through a machine, according to Reuters.

Isis said the network would use Discover Financial Services' national payment network, which is used by seven million U.S. merchants, and that Barclaycard U.S., a unit of Barclays Plc, was set to be the first lender on the network to offer mobile payment products.

After kicking off its service with just Discover and Barclays, Isis plans to become available to other merchants, banks and mobile operators.

Using cell phones to pay for items directly at a retailer is known as point-of-sale purchases.

Isis said it will use a short-range wireless technology known as near-field communication, which enables an encrypted exchange of information between devices that are placed at a short distance to each other.

The Isis setup passes encrypted information between devices at close range but doesn't require contact, explained the Los Angeles Times.

That differs from technology from VeriFone or Square, which use accessories that can read a physical credit card, the Times added. The newspaper also reported that the companies behind Isis are developing security and privacy safeguards.

The new mobile payment service is expected to roll out over the next 18 months.

Not coincidentally, Google (News - Alert) CEO Eric Schmidt showed off an upcoming Android phone with a near-field communication chip on Monday, CNET reports.

TMCnet reports that Google is designing a mobile phone with a built-in payment system that could compete with and eventually replace credit cards.

Michael Abbott, a former GE Capital executive, was named on Tuesday as chief executive of the Isis venture. He too looks at the possibility of competing with credit cards.

 “While mobile payments will be at the core of our offering, it is only the start,” Abbot said in a statement. “We plan to create a mobile wallet that ultimately eliminates the need for consumers to carry cash, credit and debit cards, reward cards, coupons, tickets and transit passes.”

Over the next year and half, the Isis venture will be rolled out in “key geographic markets,” the companies said, eventually becoming available to all merchants, banks and wireless service providers, according to the Times.

The Times said that card issuers such as Visa and Mastercard have also been testing options that would likely compete with Isis.