The contactless payment system will utilise Near-Field Communications (NFC) technology provided by Mastercard that will allow users to wave a specially-built mobile phone within a few inches of a point-of-sale reader to pay for goods.
"This partnership brings together a leader in communications and the UK's leading payments brand with the aim of revolutionising the way people pay," said Barclaycard chief executive Antony Jenkins.
Tom Alexander, Orange UK chief, added: "Today you pay for things by cash or on your credit card. Tomorrow, you'll use your mobile to buy the things you want, whether that's on the high street or the internet".
"There has been a lot of talk about mobile payments and now it's going to become a reality for our customers because of Barclaycard's commitment to contactless technology and the coming together of two dynamic and imaginative organisations," said Jenkins.
Jenkins also revealed that he expected the technology to be in use within three years.
It is thought the system will let consumers purchase transport tickets, as well as goods and services. The pair also said the payments would be secure as the data stored in the phone's SIM card and that sent to the various retailers would be encrypted. Orange also revealed a secret code would need to be entered before any sensitive information could be accessed by retailers.
Contactless payment via mobile phones has already proved a success. Between October 2007 and May 2008, Barclays and mobile provider O2 trialled a contactless payment system in conjunction with handset manufacturer Nokia and Transport for London (TfL). Using NFC technology, 500 handset owners were able to travel on tubes, buses and trains by waving the phone near an Oyster Card reader or make purchases under £10 in a number of high street stores including Threshers and sandwich shop Eat by tapping the device on a specially designed console.
After the trial, O2 revealed that 89 percent of participants were happy with the Oyster Card application while 87 percent also claimed their choice of handset would be influenced by its ability to be used as an Oyster card.