O2 has linked up with Transport for London, Barclaycard, Visa Europe and Nokia for a trial of its new initiative, the O2 Wallet.

Five hundred travellers have been issued with Nokia phones which double as a travel pass and payment system that can be used to make small value payments of up to £10.

Contactless payment terminals have been installed in 1,000 shops and cafes in the City of London, which means users can travel on public transport or buy a coffee simply by touching the phone to a reader.

According to O2, personal information will sit on your SIM card, allowing you to throw your old leather wallet into a drawer at home, never to be used again. This has raised concern over security, so PIN protection could be incorporated for larger transactions.

A full launch of the service is expected by the end of 2008.