This story has been updated.

T-Mobile USA wants to get its hands on your wallet -- your "mobile wallet," that is. In partnership with mobile giants AT&T and Verizon, the Bellevue company is gearing up for launch of a mobile wallet venture that will allow consumers to make purchases with their smartphones. And some big retailers are getting involved, though security fears and cost concerns may hinder others from participating.

NFC, which stands for near-field communication, is contactless technology that allows smartphones to exchange information with other NFC-enabled devices, such as terminals, kiosks and checkstand readers, via an encrypted channel.

The technology already is big in Japan, where users with NFC-equipped phones can use their devices to pay bills, enter a subway terminal or buy lunch at McDonald's. But it has yet to catch fire in the U.S.

The stakes are substantial when it does catch on. Juniper Research, a U.K.-based market research firm, estimates the mobile payment market will leap to $633 billion by 2014, from $240 billion this year, and that one in six mobile users worldwide will have an NFC-enabled phone within the next three years.

T-Mobile, AT&T and Verizon are among the technology giants looking to tap into this growing market with Isis, a mobile wallet service that will let consumers pay for goods with their smartphones and allow merchants to market directly to those users. The New York-based service is a joint venture of the three firms. (AT&T is seeking to overcome legal and regulatory hurdles to purchase T-Mobile for $39 billion).

Running neck-and-neck with Google Wallet, a similar service expected to be released late this year or early 2012, Isis says its platform will let consumers store credit and debit card data, receive coupons, and eventually store loyalty cards, tickets, transit passes and more.

Headed by Michael Abbott, a former financial services executive with GE Capital, Isis is getting ready to launch a pilot service in Salt Lake City and in Austin, Texas, in 2012.

But are merchants and consumers ready for mobile wallets?

Isis hasn't provided many details about merchant partners, other than to say it's in the process of signing up banks and merchants. Isis already has partnerships with the four major credit card companies: American Express, Discover, MasterCard and Visa.

Google Wallet, meanwhile, has signed up major retailers and restaurant chains such as Walgreens, Macy's and Subway.

Some local companies are excited about the prospect of mobile payments. Nordstrom, for instance, is "actively looking at different technologies in this space," said spokesman Colin Johnson.

The Seattle-based upscale retailer has ramped up its technology offerings in recent years, incorporating mobile checkout devices, installing Wi-Fi hotspots in stores and offering e-receipts. Mobile wallets could be next.

"We want to put ourselves in a position to service digital wallets when the customer decides it's important to them," said Johnson. "We think it has potential to improve the overall shopping experience."

Johnson declined to say which services the company is investigating, but said its goal is to make Nordstrom a more compelling place to shop.

"Our whole focus right now … is finding more ways to evolve with the customer," he said. "That means increasing speed and convenience on a lot of different fronts and point of sale; that's obviously something that’s an important part of that experience."

Other companies are less enthusiastic. A spokeswoman for Seattle-based cookware retailer Sur La Table said the company has no plans to incorporate contactless payments into its stores.

For Isis and Google Wallet, success of the endeavor will rely on their ability to persuade merchants and banks to sign on, despite some barriers to entry.

For now, cost may be the most significant deterrent, especially for smaller retailers.

Merchants would have to spend about $200 per device, reported the Federal Reserve Bank of Boston in a 2010 policy paper. They would also have to pay associated merchant fees, though it's not clear if those fees will be higher or lower than the current swipe fees merchants pay to accept credit cards.

There could be fees associated with sending promotions or coupons to customers. Isis said its revenue will come from fees charged to marketers who send special offers to consumers' phones, though it didn't say if merchants who accept contactless payments will also pay a fee to market their products.

Embedding NFC technology in phones also adds $10-$15 cost to phone makers, according to the Boston Fed. Yet the phones are rolling out. Samsung, Research in Motion, Motorola and Nokia all have at least one NFC-enabled phone on the market, and devices from Apple and others are expected soon.

There are benefits to the technology. Accepting contactless payments could allow retailers to engage more deeply with customers by sending reward cards and coupons directly to customers' phones at checkout.

Installing the NFC readers could also help prep merchants for the slew of young, technology-savvy shoppers hitting the market. According to a recent study by MasterCard, people aged 18 to 34 are most at ease with the idea of mobile payments, with 65 percent of them saying they feel more naked without a phone than without a wallet.

One concern is security. Some 63 percent of those polled by MasterCard said they would need additional confirmation that their financial information would be secure before using their smartphone as a mobile wallet. However, those fears may be misplaced. According to the Boston Fed, the technology is "no less secure" than the credit cards we currently use.

That's because in a well-designed mobile wallet, a customer's financial information is not stored on the phone, but rather in a secure server protected by firewalls and other security protocols, said David Baker, vice president of services for security firm IOActive, of London and Seattle.

Baker said consumers are more likely to have their credit card information stolen handing over their credit card at a restaurant than entering it into an encrypted session on their phone or computer.

"(A mobile wallet) is essentially a new way to use your credit card and it is intended to be safe and should be safe, as long as people are correctly protecting the back-end systems," said Baker. "Nothing is ever 100 percent secure."

Correction: An earlier version mistakenly referred to Isis as an Aspen, Colo.-based venture. The company is based out of New York, NY.