The introduction of a pay-by-phone parking system in Melbourne is expected to cut the council's fine revenue by as much as $900,000 a year.


The new Payzone system, imported from Ireland, will let motorists pay for on-street parking at the City of Melbourne's 12,000 parking bays via a smartphone app, under a proposal to go before the council on Tuesday.


A trial of similar pay-by-phone technology has been running in Carlton since 2011.


Motorists who use the service register their details and are charged via credit card. They receive a text message reminder 15 minutes before their parking limit expires and do not have to display a ticket on their car.


According to a council report, the new technology could lead to a reduction in fine revenue of about $900,000 a year.


The rollout of the pay-by-phone parking system will cost the council $890,000 over three years, but this is expected to be offset by $460,000 saved in maintenance when hundreds of old parking meters are removed.


The council said the system would not replace ticket machines and parking meters, but provide an alternative payment method to motorists.