LAS VEGAS-PayPal Inc. officially went mobile, launching a service that allows users to make purchases and send or receive funds via wireless phones.
Wireless subscribers can use the offering-which the company quietly began testing several weeks ago-to send money to other registered PayPal members by sending a text message to the company. The sender then receives an automated call from PayPal requesting a PIN number to complete the transaction.
The eBay subsidiary hopes to drive usage of the service with a “Text to Buy” marketing campaign hawking CDs, DVDs and other goods in print, on the Internet and through TV commercials. Ads will include an item code that can be sent via text to purchase the items.
Twentieth Century Fox Home Entertainment, MTV, NBC and Bravo have signed to the effort; Magic Johnson Foundation, Amnesty International, UNICEF and other charities will accept contributions using the service. The former NBA star made an appearance to back PayPal and urge wireless companies to develop content and applications for inner-city consumers.
“The growth of your business will be through urban America ,” said Johnson, who owns Starbucks and Burger King franchises in urban markets.
PayPal will square off on the mobile payment playground against Obopay, a California-based startup that emerged from stealth mode last month. Obopay offers a downloadable application that offers real-time purchases and transfers and can be used on nearly any mobile phone. Users can send money nearly instantaneously or request payments from other members, and the company offers a debit card that can be used in retail outlets or at ATMs.
The company is backed with $10 million in Series A financing from Redpoint Ventures, Onset Ventures and Richmond Management.
Obopay charges 10 cents per transaction, paid by the sender. While the technology integrates with banking systems, members are required to set up a stand-alone Obopay account. PayPal members can send and receive money free; vendors pay the digital transaction company a percentage of each sale.
PayPal President Jeff Jordan announced the new offering during Thursday’s keynote address at CTIA 2006. “There’s a saying in the industry that mobile commerce is always two years away,” Jordan said. “We’re not buying that. Two years is history.”
Indeed, the wireless industry has failed to gain interest in the concept of a “wallet phone” despite several high-profile trials. While the value proposition of waving a handset over a sales scanner is minimal compared to swiping a credit card, Obopay and PayPal may deliver a compelling system that complements, rather than tries to replace, plastic. And retailers don’t need to install costly short-range technologies to “read” phones at the sales counter, noted James L. McQuivey, a professor at Boston University and former Forrester Research executive.
“PayPal’s step to enable mobile payments jump-starts mobile retail in a big way,” McQuivey said last month. “And all of this is riding on the back of the retail systems we already have, meaning almost no new investment by Wal-Mart is required to make it work.”
Chief Executive Officer Carol Realini said Obopay is in talks with “every carrier” in the United States about deploying the service. The developer has yet to announce any deals with retailers, but looks to target teens and young adults by enticing them to send money to each other with their phones instead of exchanging cash.
Realini said she hopes Obopay’s service eventually will be used at convenience stores and other brick-and-mortar retailers instead of cash, which can be both costly and risky for companies to manage.
“The cell phone will do for money what the iPod did for music,” she predicted. “Instead of having cash in my wallet, I’m going to have money on my phone.”
