Mobile payment revolution: Why everyone wants in

Those pesky coins weighing you down could soon be a thing of the past, at least that is what many investors are banking on. You can already pay for your parking or lunch using your smartphone, and the mobile payment market is looking increasingly crowded.

The global market for mobile payments is forecast to grow to about $720 billion worth of transactions by 2017, up from $235 billion last year with more than 450 million users, according to research firm Gartner.

Read MoreWho will own mobile payments? Close your eyes and point

Mobile payment
Daniel Grizelj | Getty Images

Start-ups such as Square but also retailers, internet and tech giants such as Google, Alibaba and Apple are fighting for market share.

Square makes a small device firms can use in conjunction with an app to turn any smartphone into a credit card reader. The firm has received a lot of attention on Wall Street, even from banks whose traditional payment methods it challenges. The group became the latest mobile payments company to secure credit in a deal announced over the weekend.

Read MoreSquare secures credit in 'low hundreds of millions'

In China, internet provider Tencent and online shopping giant Alibaba, which is expected to list in New York later this year with initial valuations reaching as much as $250 billion, both have mobile wallet offerings and incentivize users to pay digitally with free cash credit. The wallets allow users to put money on their phones to spend in-store. Taxi apps, which locate the user and minicabs in the area to offer a quote, have been instrumental in driving growth in mobile payments.

Swiss & Global fund manager Jian Shi Cortesi, who runs a Chinese equity fund, said taxi apps are predominantly being used to educate users how to pay for things using their smartphones.

"We are seeing the daily volumes under these [taxi app] campaigns rising to 700,000 Tencent users a day and 300,000 Alibaba per day. That is a really high number," she told CNBC.

Read MoreAlibaba valued at up to $250 billion in grey market bids

"Alibaba and Tencent actually give people cash," she added, in an effort to encourage people to adopt the technology.

Square is currently valued at around $5 million, following around $200 million in additional capital it bagged last weekend.

Co-founder and CEO Jack Dorsey is said to be meeting with banks about a potential public offering for Square.

Square, a credit card reader, is arranged on an Apple iPhone.
Jin Lee | Bloomberg | Getty Images

Meanwhile Apple has millions of customer card and bank details already linked to iTunes accounts and the App Store as well as iBeacon. The iBeacon location technology allows stores to beam out a signal to nearby smartphones, which (once the corresponding app has been downloaded) will display messages to users including offers or other information. Chief executive Tim Cook has also hinted at further future plans for mobile payment.

Read MoreUber CEO Kalanick: No plans to go public now

eBay has well-established online payment arm PayPal and is said to be experimenting with new technology, and Google launched Google Wallet in 2011, integrating it in its email service Gmail last year.

U.K. supermarket group Tesco is set to launch its digital wallet this year as it also takes on the established banking sector by offering current accounts.

Banks under threat?

Alibaba and Tencent's move into mobile payments completely sidesteps banks. Cortesi says that will pile pressure on banks.

Read MoreYet Another Bank Fee Could Be a Pain in the App

"They are eating the cakes of the banks. The banks so far look a bit paralyzed – they don't have a strategy to respond to it. Unless there is some kind of internet policy coming out forbidding internet companies to do this, I think the banks are up against some challenges," she said.

Technology analyst at Panmure Gordon George O'Connor said consumers are more ready than ever to put data on social media and purchase on their phones, which alongside innovation in online payment has created a "once in a decade kind of generational shift."

"Banking as an industry has huge problems in terms of customer satisfaction and they have been very slow to react," he added.