India is one of the world's fastest growing markets for mobile phones, with 80 million Internet-enabled handset users predicted by the end of 2009.

Rapid adoption in developing countries such as India will fuel a boom in mobile payments over the next three years, with global transaction volumes reaching $250 billion in 2012, according to a recent report from Arthur D Little.

Today, many mobile banking offerings require a dedicated SIM card in order to authenticate users, resulting in poor user experience and uptake, says the university.

The funding from UKIERI - which is designed to encourage research links between the UK and India - will help a team of informatics and engineering specialists from the university in their bid to develop security software which generates a personal code or "crypto key" to each user via their existing SIM card.

The project's leader, Dr Rajarajan, says: "The GSMA's Mobile Money for the Unbanked initiative has set the global goal of bringing mobile financial services to 20 million people, who previously did not have bank accounts, by 2012. But security concerns and the complexity of many services will hamper adoption. With this new technology, we hope to overcome these barriers-to-entry and help both banks and mobile network operators to roll out secure and easy-to-use mobile banking services."

The researchers have already worked with banks in India and the UK to develop a prototype of the technology, and are also liaising with local government organisations to explore how the system could be deployed in other mobile transaction applications, such as paying for parking and congestion charges.

The university says a feasibility study will now be carried out by Warwick Business School and a cyber criminologist from The University of Leeds Law School will develop the necessary legal framework.