Bank of America Corporation ( BAC - Analyst Report ) is testing a new mobile payment technology in collaboration with Boston-based Paydiant, a mobile wallet and mobile payment platform, according to a Reuters report. BofA is currently using the new technology in Charlotte on a trail basis at five merchant locations for the next three months. Interestingly, only the employees of the company are involved in the test run.

The technology being tested utilizes Quick Response or QR codes. It lets the customer pay at a store by scanning the image of QR codes, which unlocks the customer’s bank information, stored in BofA’s network, for completing the payment process. Moreover, the technology does not require disclosure of client sensitive information with the payment intermediaries like Visa Inc. ( V - Analyst Report ) and Mastercard Incorporated ( MA - Analyst Report ) .

Further, as the technology does not require any additional sophisticated hardware or phones, it can easily be used by Apple Inc.’s ( AAPL - Analyst Report ) iPhone and Google Inc.’s ( GOOG - Analyst Report ) Android devices.

This is not the first time that BofA is testing a new mobile payment system. Earlier, the company was running a pilot project for Near Field Communications (NFC) technology that uses a short-range wireless technology to transfer money to the merchants. NFC technology requires a chip to be installed in the mobile phone that transmits a radio signal when it is waved or tapped at a device at the merchant’s place.

Banks and financial institutions generate significant revenue for transferring money from the purchaser to the seller through debit and credit cards. With new regulations putting caps on exchange fees, the banks are trying to find new avenues to augment their revenues. One of these alternatives is to turn mobile phones into digital wallets.

Also, as the smart phones are increasingly becoming affordable, banks and technology companies are trying to find out more sophisticated but easy means to transfer money from purchaser to merchants. Many banks have started offering digital wallet facilities to their customers. Apart from BofA, JPMorgan Chase & Co. ( JPM - Analyst Report ) and Wells Fargo & Company ( WFC - Analyst Report ) are also trying relentlessly to meet the growing demand for mobile wallets and improve their market share through it.

Currently, BofA retains a Zacks #3 Rank, which translates into a short-term Hold rating. Also, considering the fundamentals, we maintain a long-term ‘Neutral’ recommendation on the stock.