THE term payphone is set to take on an entirely new meaning.

KPMG in the North-west believes debit, credit and store cards face competition from mobile phone operators.

The companies are suffering from drops in revenue because of the boom in text messaging and debts incurred when they paid for 3G licences.

KPMG says it is now looking to capture a new source of revenue -- allowing subscribers to pay for goods and services by mobile phone.

John Costello, a partner who specialises in the telecoms sector at KPMG's Manchester office, said: "Mobile operators are in a strong position because of the sophisticated systems that they have had to build in order to bill their customers.

"Mobile billing systems are far removed from the solid static systems of the banking world.

"These systems have to be very flexible as they combine many different packages to generate a final customer bill."

KPMG says the exact processes involved in paying by mobile are not yet clear. But it is thought that fraudulent use can be greatly reduced because the phone can be disabled centrally to prevent further fraud as soon as it is detected. Another advantage for operators is that they know who their subscribers are and they could use this information to authenticate them during the payment authorisation process.

Mr Costello added: "One of the stumbling blocks facing mobile operators is that of pricing.

"In order for operators to be able to bill their customers accurately, they will need to know the cost of all the items purchased -- which can be obtained from retailers.

"By providing the network and billing for the connection, operators will be able to amend their invoicing systems to allow them to bill their subscribers for what they buy."