Internet giant, Google on Thursday announced the new ‘Google Wallet’ service for mobile payments based on the near field communications (NFC) technology.

The company is set to begin testing the service that will allow customers to pay at retailers wirelessly through their mobile phones. Google is set to announce the names of the retailers who will participate in the test phase for the service. Google Wallet will be rolled out in San Francisco and New York City as test markets. The service has Citibank, Mastercard, Sprint and First Data as it partners.

The service will be available on select Android-based Sprint smartphones including Nexus S 4G.

Wallet is being rolled out in association with Mastercard’s existing PayPass network. Mastercard claims it has 124,000 PayPass-enabled merchants in the US. However, it is not known how many these merchants will offer NFC payment system to their customers.

The NFC payment mechanism not only requires secure software, but also smartphone hardware and merchant hardware. The technology is being tapped into many several manufacturers to offer in their devices. NFC is already in use in countries in Asia but is relatively very new in the US and European markets.

“Google Wallet will work best if it’s an open commerce ecosystem so you will be able to carry all the credit cards, offers, loyalty and gift cards you choose—and eventually much more. To this end, Google Wallet will make it possible to integrate numerous types of partners, and Google, Citi, MasterCard, First Data and Sprint invite the banking community, mobile carriers, handset manufacturers, merchants and others to work with Google Wallet.”