M-Pesa is one example of a mobile payments system
A banking system using mobile phones could soon help millions of the world's poorest people to tackle poverty.
Branchless banking allows people to transfer money via text messages without the need for banks.
A three-year project led by the UK will build on an earlier money transfer programme set up in Kenya, the government has said.
Two billion people in the developing world have no access to any form of financial services.
Speaking at a meeting of banking and mobile phone technology experts, International Development Secretary Douglas Alexander said millions could be lifted out of poverty if they had access to a banking system.
The Department for International Development predicts that with the use of mobile branchless banking one billion people could benefit in the next five years.
People who are too poor to use traditional banks, or who live too remotely, could use the service to save and transfer money between themselves as well as receiving money sent from family members in other countries.
If you look forward, I don't think it is controversial to think people [in the UK] will be walking out of their home with their mobile phone and using it as their wallet
In Kenya, where mobile phones outnumber banks by 25,000 to one, there are already five million subscribers to the M-Pesa money transfer service. It is now being expanded and used to pay salaries and bills.
Once a Sim card in the phone is registered, users can deposit money with an M-Pesa agent, send a text message to the person they wish to pay and this person can then collect the money from their local agent.
The service can be also used to pay for utility bills. A small number of shops and taxi companies also accept it as an alternative payment method.
The average transaction is around £27.
Andrew Bailey, chief cashier at the Bank of England, said that developing countries were more advanced than the UK in using mobile phones for payments because their technology had leapfrogged some of the developments that the UK banking system had been using.
Other countries around the world are beginning to use mobile phones to transfer money.
Vodafone, which developed M-Pesa, regarded it as a success and created a similar system for use in Afghanistan where travel was difficult and infrastructure damaged.
Yet, it has not followed the same path as the Kenyan model.
"It is a different, more corporate offering. We are seeing companies use it to pay their staff," said Caroline Dewing, of Vodafone.
Tanzanians have also been able to pay using M-Pesa since early 2008. This system works in a similar way to the service in Kenya but the take-up has been slower, according to Vodafone.
Sending money via text message may soon be in use in the UK. A pilot project run by Vodafone and the money transfer company Western Union is set to allow customers to send money across country borders.
UK workers will be able to send money back to Kenya using the M-Pesa service.
"This will provide Kenyans with an opportunity to receive small values of cash from abroad in a fast, safe and affordable way," said Michael Joseph, head of Safaricom, Vodafone's Kenyan partner.
Dave Birch, chairman of the Digital Money Forum, believes consumers in the UK will one day use their mobile phones to pay for things using a range of different applications.
"If you look forward, I don't think it is controversial to think people will be walking out of their home with their mobile phone and using it as their wallet," he said.