Google Inc will launch a mobile payment system on Thursday, in the latest bid to help consumers pay at the checkout with smartphones instead of traditional credit cards, a person familiar with the matter told Reuters on Tuesday.

Google will work with MasterCard Inc, the world's second-largest credit and debit card processing network, to launch the system, the source told Reuters.

The world's largest Internet search engine has been working with MasterCard and Citigroup Inc to develop a mobile payments system, the Wall Street Journal reported in March.

Citigroup did not immediately respond to requests for comment and MasterCard declined to comment.

Shoppers abroad, especially in Asia, can already wave cellphones at the check-out counter to pay for everything from groceries to gasoline. Mobile phone operators, banks, technology companies and card processing networks Visa Inc and MasterCard are vying to gain a foothold in the still-small but high-potential U.S. mobile payments market.

Google has invited reporters to attend a partner event on Thursday in New York to demonstrate what it called its latest innovations.

It plans to unveil a mobile payments system that will run on the Google Android operating system and will be available on phones from Sprint Nextel Corp, Bloomberg reported on Tuesday.

Google and Sprint declined to comment on Tuesday.

(Reporting by Maria Aspan; additional reporting by Sinead Carew in New York and Alexei Oreskovic in San Francisco; Editing by Gary Hill)

Smartphone Google Launch