New services allow payment via text message

A wave of new options are offering cell phone users a way to transfer money and make purchases on the fly, using text-messaging technology.
EBay Inc.'s PayPal unit this month introduced a service called PayPal Mobile that allows consumers to send payments to others, purchase items from select retailers, or donate money to some charities by punching a short text code into a cell phone. Obopay Inc. a Palo Alto, Calif., start-up, began enrolling consumers in its mobile-payment service this month. And start-up TextPayMe Inc. of Redmond, Wash., launched a service in December allowing people to send money to each other via text messaging.

These services come on top of efforts by credit-card companies and cel lphone makers to create so-called mobile wallets. Motorola Inc., MasterCard International, Visa and others are developing services that would allow users to store credit-card information on cell phones that can be waved over special terminals at the checkout counter to make purchases.

The two categories of services are very different and are unlikely to compete. Mobile wallets are intended as a quick way for consumers to make purchases anywhere their credit card is accepted, without having to carry their wallets.

Text-payment services are designed primarily as cash-swapping services between parties that don't accept credit cards, say when people pay a babysitter or someone selling goods through classified ads. PayPal, though, does have a way to allow limited purchases from merchants.

Cooper Marcus, a 33-year-old Berkeley, Calif., resident, recently used TextPayMe's service when he wanted to split a $40 restaurant bill with his fiancee and collect $88 from a friend who owed him money for a wireless router. "I always have my phone with me but I don't have cash," says Mr. Marcus, who is chief executive of a parking management company.

These services are all part of a range of efforts from telecommunications companies, financial-services firms and retailers to enable mobile financial transactions. As consumers become more technologically adept, businesses see cellphones as a potential tool to speed financial transactions, encourage impulse buying and potentially reduce payment-processing costs.

Mobile payments have already taken off in Europe and Asia - where many consumers pay for restaurant meals and public transportation by pushing buttons on a cell phone. World-wide, financial transactions involving a mobile handset are expected to climb to $37.1 billion in 2008 from $3.2 billion in 2003, according to a study last year from Arthur D. Little, a management-consulting firm.

But such services haven't yet taken off in the U.S. for a variety of reasons. For one, the "mobile wallet" concept would require retailers to invest in special payment terminals, and consumers to buy specially equipped cell phones.

The text-messaging services often require users to turn over financial information to third parties like PayPal, which could make some users wary. Some of the services can be linked to credit-card or bank accounts so that consumers can add funds to make payments, or withdraw funds that others have transmitted. The text-messaging companies say they take security precautions, such as requiring users to verify their payments with a PIN.

Fees are another issue. Obopay, for instance, charges 10 cents per payment to send mobile payments to another person. TextPayMe, which is free now to early users, will soon start charging new customers to send money, though it hasn't decided how much.

PayPal, the online payment-processing service in San Jose, Calif., says its new mobile service doesn't charge transaction fees. So far, the service has about two dozen participating retailers and charities, which provide product or transaction codes to PayPal Mobile. By text-messaging these codes, users can buy items such as CDs, DVDs and clothing from merchants including 20th Century Fox Home Entertainment Inc. and the NBA Store, a unit of NBA Media Ventures LLC. And they can send text-messaged donations to charities such as Unicef and Amnesty International. PayPal accounts are linked to a credit card or bank account, and mobile payments are deducted from or credited to one of those options.

PayPal Mobile is available to all of PayPal's more than 100 million registered users world-wide. The company estimates that most of its users have cellphones and thus the potential to use the mobile service, but it won't disclose how many have done so thus far.

With TextPayMe, users can transfer money between online accounts that can be linked to a credit card or a bank account by sending a text message to, with the word "pay," a dollar amount and the phone number of the recipient. After the first party sends the message, the second receives a message saying "You got money" - a twist on AOL's familiar phrase "You've got mail." (If the receiver doesn't yet have the service, they get an offer to sign up.) The sender then receives an automated call requesting a PIN to verify the charge.

The service works on virtually any phone with text messaging. Philip Yuen, chief executive of TextPayMe, declined to cite the number of TextPayMe users but says the service has been growing since the end of last year, when it had roughly 900 members.

At Obopay, users must register at the company's Web site and download free software to their cellphone before they can send payments. Recipients receive a message saying they have cash from a particular phone number and are directed to register at the Web site. So far, Cingular is the only carrier that allows users to easily download Obopay's application to their phone, says Obopay. The company says it is still talking with Sprint Nextel Corp., Deutsche Telekom AG's T-Mobile USA and Verizon Communications Inc. to support its software program on their service, though some Sprint phone models can access the company's application.

Obopay also issues a MasterCard-branded debit card linked to the mobile-payments account, so consumers can use an ATM to withdraw cash that has been text-messaged into the account. While the company charges 10 cents to send payments, there is no fee for receiving payments. The company declined to disclose how many consumers use its service.

Deirdre Hancock, an 18-year-old San Francisco resident, says Obopay has helped her and her fiance when they've been stuck without cash because it lets them text-message money to each other and access it through the companion debit card immediately. "It's so convenient," she says, adding that the 10-cent fee for transactions is insignificant.

Among some "mobile wallet" payment methods being developed, MasterCard International will soon begin U.S. testing of a mobile-phone payment service that lets users download account information to a Nokia 3220 cellphones. Users can use their phones to pay for purchases by tapping their phone against MasterCard PayPass terminals. The account information would be sent wirelessly to a chip embedded in the phone.

Last December, Visa launched a mobile payment pilot with Cingular Wireless, a joint venture between AT&T Inc. and BellSouth Corp., and Nokia Corp. Under the program, select season ticket holders for sporting events at Atlanta's Philips Arena can buy from concession stands by holding a Nokia 3220 mobile phones at special terminals.

Meanwhile, Motorola is preparing to launch a mobile wallet service in the U.S. later this year. Dubbed M-Wallet, the service will allow users to store credit-card and banking information in their cellphones, which they can use to make payments by holding the device before a chip reader.
Wall Street Journal
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