Gartner says SMS text messages will continue to be the dominant channel for mobile payments, although take up of wireless application protocol (WAP), unstructured supplementary service data (USSD) and near field communications (NFC) contactless services will also grow.

But despite the rapid take-up, Sandy Shen, research director at Gartner, is cautious about revenue opportunities that m-payments offer for banks and claims mobile operators have more to gain from the technology.

"Banks can justify the investment if they look at mobile as an extension of their existing channels and bundle payments with additional banking services," says Shen.

Mobile payments are most likely to succeed in developing markets where many people are "unbanked" and there are few payment options, says Shen. In contrast, the service is set to be seen as just an extension of existing options in developed markets.

But Shen warns banks may be hit by offerings from non-financial institutions like Obopay and PayPal, which are more proactive and offer better and cheaper services.

"These could threaten the lucrative card business should momentum build up," says Shen.

Asia Pacific dominates the mobile payments field, with a projected 28 million users in 2008 - 85% of the worldwide total. North America users are expected to hit one million this year while Western Europe is expected to have 499,000 users.

Shen says Asia Pacific will continue to lead the way on mobile payments for the foreseeable future, especially with the emergence of massive markets in India and China. Western Europe and North America lag mainly because of a more established payments infrastructure and greater concern over security. However, Gartner says NFC-based contactless technology may provide a breakthrough in these markets because of the convenience it offers and its "cool factor".

A separate study from Javelin Strategy and Research is also optimistic on the prospect of NFC-enabled mobile payments, but warns industry players must work together to drive adoption.

"Tap-and-go contactless payments will pave the way for cell phones and handheld computers to become 'electronic wallets,' packed with consumers' payment and merchant cards, coupon offers, even medical records, family pictures and more," says James Van Dyke, president, Javelin. "But consumers won't benefit until the primary players - card networks, financial institutions, mobile carriers, merchants and handset manufacturers - work together toward a unified, simple solution that lets everyone win."