Mondex this week has been demonstrating a mobile phone equipped with a built-in smartcard reader. The card allows users to make purchases over the GSM mobile phone network. Showing at smartcard exhibition Cartes '99 in Paris, the payment solution is a result of a partnership between Mondex, Vodafone and smartcard provider Giesecke & Devrient. The card lets users on the GSM network make immediate cash payments and enables cardholder verification security for both the consumer and service provider. As Mondex enables the transfer of value between cards its e-cash application can work without developing new infrastructure. The credit card sized smartcard is being demonstrated in a dual slot Motorola StarTak mobile phone. The card's security architecture lets users carry up to five different currencies simultaneously, allowing it to be used in several different markets. A recent report from research firm Datamonitor predicted smartcard use in Europe is set to explode, with the total number of chip cards in circulation between 1998 and 2002 doubling to reach 1.5 billion. The report found that the applications driving the smartcard boom were banking, telecoms and health and transport projects. Declan Lonegan, director of wireless service at analysts' Strategy Analytics, welcomed the news of Mondex's solution. "This area is just starting to get the attention it deserves," he said, "We're very bullish about the future of mobile e-commerce. Some reports I've seen are forecasting that 10 percent of e-commerce will be done by mobile by 2002." However there are still hurdles to mass market take-up of mobile e-commerce smartcards. One of the major stumbling blocks is the need for specially-designed handsets, with slots for the cards. A spokesman for Mondex agreed that at the moment this was just "a proof of concept", but pointed out that France Telecom had recently announced that all of its handsets going forward would be smartcard equipped. Lonegan believed that "it will be a long time before you'll see large scale commercial rollout of [smartcard enabled] handsets," but said that the advent of WAP services in the next few months would drive demand. Mondex operates an electronic cash system that runs on a smartcard containing an electronic purse. A microchip in the card keeps a record of the last ten transactions and the cash can be locked with a code set by the user. Users top up the card with e-cash by transferring it from their banking accounts. What do you think? Tell the Mailroom . And read what others have said. See the e-commerce special for more business news.