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The Bank of Tokyo-Mitsubishi UFJ and KDDI Corp. are in final talks to set up a bank that would accept the use of mobile phones as debit cards, sources said Thursday.

They companies aim to establish a company this year that would create the bank in 2007 for users of au mobile phones with debit functions, the sources said.

Under the service, people would be able to use their mobile phones as debit cards because the phones would be linked to their bank accounts.

The mobile phones will also have the capability to be used in Internet auctions and for downloading music, the sources said.

KDDI’s planned tieup with BTMU is a response to rival NTT DoCoMo’s mobile phone-based financial services, the sources said.

NTT DoCoMo launched an “iD” credit-payment-service that allows mobile phones with electronic payment functions to be used by people who own credit cards from Sumitomo Mitsui Card Co.

NTT DoCoMo is expanding credit-card ties with other financial institutions and will start its own mobile phone-based credit card service in late April.