Mobile money: priceless: Citi, Obopay test wireless wallet

Obopay Inc. continued to gain ground in the mobile payment space, inking an impressive deal for a pilot program to allow Citi customers to send and receive money from their phones.
The Redwood City, Calif.-based startup said Citi users will be able to track and manage their mobile payment accounts remotely by monitoring balances, viewing payment histories and adding funds directly from handsets. Customers can also use a debit card to tap their accounts.
The companies declined to disclose cities for the trial, which is slated for later this year.
Citi claims 200 million customer accounts and operates in more than 100 countries. The company’s brands include Citibank, CitiFinancial, Primerica and Banamex.
Meanwhile, Sapphire Mobile Systems-yet another developer vying for a piece of the mobile payment market-announced a pilot program with Elan Financial Services, which processes transactions for 37,000 ATMs nationwide. The program, which launched last month, will allow Elan PayCard users to check balances and make person-to-person payments using their phones.
Both announcements underscore the increasingly competitive wireless payment space. Obopay and Sapphire are squaring off against fellow startups Cyphermint Inc., TextPayMe, Secure Wireless Transfers Corp. and others as well as PayPal Mobile, which launched a year ago.
The industry has long dreamt of a “wireless wallet” that consumers could use at retailers or to transfer funds, but a combination of inadequate technology and questionable business models has shackled m-commerce. But the market has seen a flurry of activity recently as wireless companies, retailers and financial institutions work together to help consumers spend with their phones.
“I think it’s true that demand (for mobile payments) is heating up,” said Edward Kountz, a senior analyst with JupiterResearch. “I think it’s clear that this is the second go-round. The marketing vision hasn’t changed that much; I think what’s changed is the ability to deliver on that vision.”
Visa several weeks ago launched a mobile payment platform designed to support contactless payments, coupons and other m-commerce-related applications. The offering “is designed to foster collaboration between the financial services and mobile telecommunications sectors,” the company said, and consists of a suite of technology tools, applications and security standards. McDonald’s has formed a joint venture with Japanese carrier NTT DoCoMo to allow users to pay with their phones at its restaurants. And HSBC Bank USA, which has more than 1 million contactless credit cards in circulation, is testing a service that couples its technology with cell phones.
And potential investors are paying attention.
“We believe that the current market dynamics may be conducive to seed- to early-stage entrepreneurial activity in mobile payments and NFC (Near Field Communication),” Rutberg & Co., a San Francisco-based investment bank, wrote in a recent research note. “In addition, we heard at 3GSM promising consumer adoption for initial RFID/NFC/Felica launches in several Asian countries, particularly for transportation ticketing.”
Significant challenges remain for the mobile payment space, however, particularly at the sales counter. Retailers must invest in readers that can accept payments from mobile phones, and carriers are looking for a place in the value chain. But it’s unlikely that consumers would be willing to pay more to pay with their phones, however, than they would to use a credit card or cash.
“Importantly, we believe the business model among mobile operators, financial institutions and others remains a significant challenge, at least for applications based on NFC-embedded handsets,” Rutberg noted.
So while peer-to-peer services such as Obopay’s and Sapphire’s account for a tiny fraction of the overall mobile payment space today, they may offer a more viable long-term business model. Consumers might be willing to pay a few cents per transaction to transfer funds or send money to a friend, and financial institutions are scrambling to lure new customers with such services.
The vast number of players on the field is sure to decrease, though, as uptake of mobile payment offerings gets legs over the next few years. The window is closing quickly for companies looking to partner with financial institutions or appeal directly to consumers.
“It’s clear at this point in time that there is a land grab” by mobile payment companies, said Kountz. “I do think the field will look very different in three years than it does right now.”