THOSE Paul Smith wallets and Gucci purses may look fantastic, but a group of Japanese technology companies is determined to make them obsolete.

Using chips developed by Sony and NTT DoCoMo, Japan’s “big three” mobile phone companies are set to introduce the world’s first functioning virtual cash network.

“Edy to Edy”, as the service is known, will allow users of NTT DoCoMo, KDDI and Vodafone mobile phones to text- message money directly to friends’ mobile phones or even to retail and utility companies.

In addition, it will allow almost every day-to-day cash transaction in Japan — buying a bowl of noodles or doing the weekly supermarket shopping — to be made simply by swiping a mobile phone over the appropriate sensor at the store.

The breakthrough, which will be revealed in full next week at the Tokyo Wireless Expo, will be available through NTT DoCoMo phones in Japan within weeks. Vodafone and KDDI are expected to offer the technology on their mobile phone networks this year.

Phone-to-phone cash transactions — a development long viewed as the holy grail of virtual cash projects — will open the way to what a Vodafone source described as “thousands of possible applications”. The concept of virtual cash has been on the drawing-board for years — and has failed more times than anyone will admit — but bitWallet, the Sony-led technology consortium, said that the saturation of mobile phones has made it possible.

Phones on the Vodafone, NTT and KDDI networks will be equipped with internal Edy chips, a technology related to the Oyster payment system used on the London Underground.

More than 20,000 retailers in Japan already accept Edy payments from mobile phones, and analysts expect that number to double over the next 12 months.

The Edy chip can be charged with a maximum of £250 and is unconnected with the user’s credit card or mobile phone bill, which has meant that the Japanese have adopted early versions of the Edy system without worrying about fraud. Transactions between phones will require both the sender and recipient of the virtual cash to enter a password before the switch is completed.

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