Mobile payment technology firm Upaid has launched 'Text cheque', a service that enables merchants to collect bill payments via mobile phones.

The firm said this mobile alternative to traditional cheques, which uses Short Message Service (SMS), provides a simple, instant and cost-effective payment option to consumers wary of signing direct debit agreements.

The service is designed for collection of any type of bill payment, whether for utilities, telecoms, store or credit cards.

The customer's bill arrives by post with the balance to be paid or minimum payment where appropriate. The customer then receives a payment request text before the due date and replies by SMS with a short password to confirm the payment.

The merchant collecting the bill payments collects the cash from the customer's bank account or credit/debit card.

Ashley Ward, chief executive of Upaid, said the service - which is operated by IBM - would provide an alternative for people that do not want to use direct debits for fear of losing control over their money.

"Text cheque is an exciting application because it provides a range of benefits for both merchants and customers," he said in a statement.

"Consumers enjoy greater flexibility and freedom about when and how they pay their bills, while merchants can significantly reduce the cost of processing cheque payments and accelerate cash flow by collecting cash sooner."