JP Morgan Chase has invested in a start-up called GoPago, targeting a much greater presence in the fast-growing mobile payments market.
The news comes hot on the heels of Barclays last week announcing its own mobile payments service, called Pingit.
JP Morgan already runs the QuickPay and QuickDeposit services, which include mobile functionality.
The GoPago free mobile application allows buyers to use mobile phones to pay for goods or services and then show the seller a receipt on their smartphone screen.
While the app is principally used in California and Nevada, JP Morgan is understood to be planning to widely expand its usage across the US and beyond.
The app would crucially allow business to extend their reach to a broader audience and provide "business tools once only afforded by large companies", JP Morgan said.
JP Morgan said that it intended its investment, for which a value was not disclosed, to aid GoPago's expansion and provide an alternative channel in the market to traditional PC-based online payments.
The GoPago app also allows businesses to make personalised offers to users, and the company claims merchants can "easily" set up their store to work with the app.
Jack Stephenson, director of mobile, e-commerce and payments at the Chase division of JP Morgan, said the company was "committed to giving consumers and businesses a great shopping experience, leveraging the latest advances in mobile payment technologies".
"Brick and mortar businesses will be able to provide a more convenient way for their customers to shop, pay and receive targeted offers on smartphones," he said. "In addition, our relationship with GoPago will allow us to provide Chase customers exclusive rewards and offers by leveraging our strong local merchant franchise and GoPago's data and analytics."
GoPago data is sent over a 256-bit Secure Socket Layer (SSL) connection, verified by VeriSign. All transactions are authenticated by a four-digit pin.
The app is available for iPhone, Android and BlackBerry, and is coming soon to Windows Phone 7. It is live at over 50 merchants in California, and at the Hard Rock Hotel & Casino in Las Vegas.