By the BBC's Andrew Verity

The Woolwich has announced the launch of a new service allowing customers to do their banking over mobile telephones linked to the internet.

It is thought to be the first service of its kind in the UK.

Customers will be able to pay bills and transfer money between accounts, using the new generation of mobile phones with internet links.

The scheme is already being tested on 100 Woolwich customers, who have been issued with WAP (wireless application protocol) mobile phones.

WAP phones have screens three times the size of a normal mobile, allowing them to display text and limited graphics from the internet.

A number of British banks have already launched limited banking services available by mobile phone. They typically allow customers to check recent transactions or request a statements.

Woolwich claims to be the first to offer real transactions such as paying bills.

The scheme imitates a similar offer already operated by a Swedish bank in partnership with Nokia, the Finnish mobile phone company. Customers will also be able to make complex arrangements such as instructing their bank to pay a bill when they are away on holiday.

For now it remains impossible for customers to pay directly for goods and services using their mobile phones. But industry observers say this should be possible within five years.

Anytime, anywhere, anyhow

The bank claims security on the new service is tight.

Customers dialling into the service make direct contact with the Woolwich's own systems. Information passing between the bank and the mobile is coded using a 128-bit encryption.

Chief executive John Stewart said: "In future [bank customers] will be able to manage their personal finances wherever they are in the world through any electronic channel or, if they prefer, use a telephone or visit a branch.

"This is real anytime, anywhere, anyhow banking. The boundaries of the possible are being constantly pushed back.

Mobile phone internet users are forecast to outstrip PC internet users and we intend to capitalise on these developments."

A deal was struck between Woolwich and Vodafone to offer free line rental to the sample of 100 customers, saving them 30p a minute at peak rates.

Woolwich plans a formal launch for the new service in April.

Peter Bamford, chief executive of Vodafone UK, claimed is was a "groundbreaking service" which eventually would develop to become "a bank in your pocket".