First Data Corp.'s partnership with a South Korean technology company will help strengthen the transaction processor's ability to support contactless payments initiated with mobile phones, according to an executive.

SK C&C, a technology services unit of the South Korean conglomerate SK Group, has developed technology that First Data's bank clients will be able to use to issue virtual payment cards that consumers can download to their mobile phones. The system is dependent upon phones having near-field communication chips that can be used to make contactless payments, a concept that has generated plenty of buzz in recent years but little actual use, largely because wireless carriers in the U.S. have been reluctant to install the components in their handsets.

The software would let First Data support multiple card accounts on consumers' phones on behalf of issuers. SK C&C also provides a mobile wallet smartphone application that consumers can use to manage their accounts.

"When you talk about delivering payment accounts to the mobile handset, there is a new set of technology that needs to be in place," said Christopher Cox, First Data's vice president of mobile product development. First Data, an Atlanta unit of Kohlberg Kravis Roberts & Co., announced the partnership with SK C&C on Thursday.

The partnership is aimed at expanding First Data's trusted service manager business, Cox said. Trusted service manager works behind the scenes to make the process of downloading payments accounts to mobile phones both efficient and secure.

SK C&C has been providing the technology to financial companies, retailers and mobile operators in South Korea since 2002.

First Data expects the services to be available in the first quarter of 2011. The company, like many others exploring the mobile payments market, is waiting for the market to determine a business model that would satisfy multiple players.

"All the signs that we're seeing [indicate] we're expecting to see NFC-enabled mobile payments to be out in scale within the next few years," Cox said.

When that happens, First Data plans to offer its service to financial companies in the U.S., Canada and Mexico.

Whether consumers embrace mobile payments remains to be seen. Some observers said they believe there is no consumer demand for mobile payments.

Other companies are now pushing mobile payments applications that use software, not chips, which means users can install the feature on their own instead of waiting for the wireless carriers to start offering the chips.

One concept that is gaining traction with users is barcodes that are displayed on the screens of smartphones. Starbucks Corp. and Target Corp. are both using these systems now to accept payments that are linked to prepaid cards.

First Data said it believes otherwise. Cox points to NFC trials worldwide in which consumers have come away satisfied with the experience. "It's easy for them to do, and they feel it's secure and they like the technology," he said.

The key to high consumer adoption will be the ability of banks and retailers to add incentives, such as loyalty rewards and mobile coupons, for using mobile payments, Cox said, and SK C&C's technology will let First Data offer those functions as well.