National Australia Bank (NAB) has collaborated with Visa and Quest Payment Systems to test a solution that will turn smartphones into EFTPOS terminal.

With the new offering, users will be able to tap the merchant’s phone with a contactless card or mobile wallet.

All this can be done without a dongle or additional payment terminal hardware.

Quest CEO Jan Mason said: “More and more transactions will require on-the-go solutions, and while we don’t see this technology replacing payment terminals at your typical high street retailer tomorrow, the transition to software based payment solutions will progress over the coming years and Quest will be at the forefront.”

The bank plans to launch the service for its customers in the coming months.

NAB executive general manager of transaction banking Andy Kerr said: “Since the introduction of tap-and-go payments, Australians are carrying less and less cash which can impact sales and growth for small businesses.

“Currently, there are limited options for merchants such as market stall vendors, boutique retailers, sole traders and start-ups to accept payments other than cash.”

Initially, the solution can be availed by users of Android devices.

The latest development by NAB comes shortly after the launch of Commonwealth Bank of Australia’s latest version of its mobile app CommBank app 4.0.