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Wal-Mart Stores Inc. (NYSE:WMT) is expected to report FY 2014 second-quarter EPS of $1.25 on revenue of $118.74 billion, compared with EPS of $1.18 on revenue of $114.30 billion in the year-ago period. Reuters

Wal-Mart Stores Inc. (NSYE: WMT) and Target Corp. (NYSE: TGT) are among about two dozen retailers that will jointly develop a technology to turn smartphones into virtual wallets, people familiar with the matter told the Wall Street Journal.

The newspaper didn't identify other retailers involved in the venture, but Friday's report said participants have combined annual revenue of $1.38 trillion and include big-box stores, drugstore operators, vending companies and fast-food chains.

These retailers are joining the race to develop a mobile-payments system that would compete with similar products such as Google Wallet, Visa Inc.'s, Intuit Inc.'s GoPayment and start-ups such as Square and Dwolla, the Journal reported.

Retailers are eager to cater to the growing demand of consumers, especially younger ones, to have an easier way to make payments. The market for such services is expected to exceed $600 billion by 2016.

The mobile-payments industry is still in its infancy and retailers seem to be betting that developing their own systems could be a way to retain customers.

However, the group of retailers cited in the Journal report is concerned about potential security and privacy risks in existing services and believes they can come up with a better solution.

What we see out there doesn't make us very happy, one executive involved in the venture was quoted as saying.

Mobile payments have other benefits, including additional revenue streams, said Daniel Trigub, who works in business development at Blue Bite, a location-based marketing firm, and is an expert in mobile marketing and payment technology, TechCrunch reported.

They want to own the consumer and all that data that comes with knowing who the transaction is coming from. There is ultimately a fight for user data and information, Trigub said.

Wal-Mart shares were trading up 36 cents to $59.18 on Friday afternoon, while Target was down 9 cents to $56.67.