The battle over which hardware should support contactless mobile payments is by no means over. Although telecommunication companies have thrown their weight behind SIM cards, the competing microSD chip is not dead yet.

DeviceFidelity Inc. on Dec. 11 announced a partnership with Spring Card Systems to create a mobile-payment app that works with DeviceFidelity’s microSD card and communicates with MasterCard PayPass contactless-payment service at point-of-sale terminals. The new application is called moneto.

The microSD card has been in mobile-payment trials for years, most notably in a test that took place in 2010 in the New York City subways.

An advantage to microSD is that the card contains both a Near Field Communication chip and a secure element, so it can retrofit into older phones that don’t have NFC capability built in. NFC is a short-range wireless communication standard that supports two-way data exchanges between NFC chips, something contactless chips in cards cannot support because of the need for a power source, such as a mobile phone or tablet.

The microSD form factor also makes it possible for a bank to send the necessary hardware to their customers for contactless mobile payments without involving a handset manufacturer or mobile operator. Because of that and other reasons, such organizations would prefer NFC functionality to be supported by the SIM card within phones (see story).

Banks could send new microSD chips to customers the way they send new credit and debit cards today.

MicroSD-based products have faced criticism for lacking a strong NFC antenna.

The moneto mobile-payments technology uses an NFC-enabled microSD chip embedded in an iPhone case (iPhones don’t have a memory slot, so a special case is required for the devices to accept microSD). IPhone users must sign up to receive the case, install the moneto app from the Apple app store and activate their account.

The user pays $80, which includes $10 of preloaded funds. Users can launch the moneto app to view their account balance, check their transaction history and make everyday in-store purchases with a tap of their iPhone at any terminal that accepts PayPass.

Users can fund their moneto prepaid account using traditional debit, credit or prepaid payment cards, direct deposit, automated clearinghouse funds transfers, or through funds-transfer service providers such as MoneyGram and Western Union.

“As this breakthrough mobile wallet launches in the U.S., it not only makes mobile payments available to iPhone users for the first time, but it also opens the door for consumers to adopt NFC while pushing mobile commerce forward,” Deepak Jain, DeviceFidelity president and CEO, said in a statement.

Moneto also comes with a companion prepaid MasterCard that can enable users to access cash at ATMs, shop online, pay bills or shop at merchants that do not accept contactless payment. Moneto also enables card-to-card and wired funds transfers from a secure Internet portal accessible via moneto.me.

“Consumers have been hearing about NFC and mobile wallets for years. Now with moneto, they can finally start using it¬–and with the most popular smartphone device on the planet,” said Kevin Haddad, SpringCard president.

The moneto mobile-wallet app is focused on delivering a faster and easier shopping experience that is consumer-friendly, Haddad said. “Our vision is simple: People who use our applications should not have to worry ‘Will this work with my phone?’ as consumers can easily make secure purchases regardless of their phone, carrier or bank,” he said.

The moneto mobile wallet is available in limited release on the iPhone 4S, iPhone 4, iPhone 3GS and iPhone 3. A number of Android models also will be supported by the second quarter of 2012. Additional phone support will be added throughout the year.

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