MasterCard is encroaching on PayPal’s territory with the launch of a new payment system designed to target online shoppers purchasing on their smartphones.

The credit card company yesterday announced the production trial of MasterPass, a service allowing credit card details to be stored on smartphones or online.

Australia will be first country to receive the service at the end of next month along with Canada, with the US and UK set for launch later this year.

Local retailers JB Hi-Fi and Harvey Norman are trialling the service at online checkouts as part of the Australian launch.

Commonwealth Bank, Westpac, NAB, and ME Bank are working on branded systems to utilise the credit card company’s system.

The service works by giving e-commerce retailers a MasterPass button at online checkout, which automatically links participating shoppers to their credit card details.

Much like PayPal’s service, which has been operating for over a decade, customers first create an account with MasterPass that is linked to their credit card details and address.

The credit card company says this will mean less time wasted by customers filling in details for individual purchases, especially for those shopping on small-screened smartphones.

Shoppers purchasing on sites requiring credit card verification codes (CVC) will have their MasterPass accounts rejected, however, with the service not able to circumvent this security check.

“Our expectation is that over time the inputting of CVC will no longer be part of that checkout experience. But cards and card-based checkouts will be around for a long time,” said Mathew Barr, MasterCard head of market development, to The Financial Review.

CVC codes are often used by e-commerce sites as an extra barrier against online fraud.

MasterPass will be expanded further into markets like Belgium, Brazil, France, Italy, the Netherlands, Singapore, Spain, and Brazil in 2013.