It seems that the next stage of the Internet revolution will involve wireless communication. Leonia Bank, Finland's second largest bank, is backing its new mobile banking service with what it says is the world's first implementation of digital certificates on wireless phones.

Digital certificates authenticate the identity of users and encrypt their transactions much like a personal identification number safeguards an automated teller machine transaction.

Generally, at an ATM or when banking on the Internet, people use a secret code number to gain access to their accounts. With this software, they can take a mobile phone and if they want to pay bills or transfer funds, they can put all the information on the phone and sign it with their own personal identification number.

The SmartTrust division of Sonera Ltd, Finland's largest mobile phone operator, and CyberTrust, a GTE company in the United States, provided Leonia with the technology.

"Our technology brings data encryption and digital signatures to transaction services," said Juha Snellman, director of services at Sonera SmartTrust.

Citigroup is expected to use the same Sonera security when it introduces wireless banking using software from 724 Solutions in the first half of this year.

Sonera and Citigroup took a combined 40 per cent stake in 724 Solutions, a Canadian software company last August.

Citibank's customers will be able to gain access to their bank accounts, pay bills, transfer funds, and trade securities by mobile phone and over devices such as personal digital assistants, palm computers and digital television. Harris Bank of Chicago, Bank of Montreal's subsidiary, last month became the first United States bank to launch access to banking and investment services via PCS digital phones using software from 724 Solutions but this does not use digital certificates.

Once countries hit a 30 per cent mobile phone penetration rate, then services like mobile banking will take off, Mr Snellman said. He expects Germany, the UK and Switzerland to follow Finland's lead.

In Finland, Leonia, which just completed a two-month mobile banking pilot with 100 customers, expects mobile services to be a hit with its 325,000 Internet banking customers.

"Finnish people are very Internet-oriented," said Matti Inha, executive vice-president at Helsinki-based Leonia. "Having a mobile bank is now the next step." Already, 62 per cent of Finland's five million people use mobile phones, making Finland the world's leading user, Mr Inha said. "I think thousands will do mobile banking very soon," he said.

To use the service, customers need to change the subscriber identification module (SIM) card in their phones. The SIM cards employ Sonera's public key cryptography and CyberTrust's digital certificates and for now will only work with phones that run on the Global Standard for Mobile Communications (GSM).

"Sonera brings a key differentiator because its technology can have both GSM and PKI on one card," said Jeremy Wyant, senior technology specialist at GTE Cybertrust. "There are a number of ways a bank and a mobile phone operator can configure this." Customers are mailed these new cards with a secret code to activate them. Leonia has yet to work out a monthly pricing plan for its service.

GartnerGroup has predicted that wireless phones will become the most common client device by 2005. The most popular type of phones worldwide are based on GSM. There are 200 million GSM users worldwide and last year, 260 million GSM devices were sold.

Phones based on the Wireless Application Protocol (WAP), an application protocol for different mobile channels, are starting to be deployed and 3G, a third generation global standard, should allow different wireless standards around the world to inter-operate in the future.

"Our goal is to go to WAP but we didn't want to wait for it to be ironed out," said Mr Wyant. "So GSM is our near-term market with a big installed base in Europe and Asia."

This week Baltimore Technologies acquired CyberTrust Solutions for $150 million (€145 million) worth of Baltimore shares.

At the RSA Data Security conference in San Jose, California this week, CyberTrust announced the CyberTrust Mobile E-Commerce Solution, which Leonia Bank has just implemented.

Also at the show Baltimore, introduced the first product of its new Telepathy suite, which brings its digital certificate software to mobile devices.