Just Put It on My Phone
Western Union just wanted a way to make it easier for immigrants in the U.S. to remit funds to relatives abroad. So last year the company set up a trial with wireless carrier Trumpet Mobile to let people send cash via cell phone.
But Western Union (WU) got more than it bargained for. Soon, parents were using the service to send college kids money for textbooks; restaurant goers began using it to split dinner checks. Suddenly, young, hip cell phone users were flocking to stodgy Western Union, many for the first time. "It does transform our available market," says Matt Dill, general manager of Western Union Mobile, which made the service widely available on Apr. 1. "There's a new customer base out there, one that's interested in moving money for different reasons."
A Gold Mine of Fees
And like Western Union. a growing number of banks, e-commerce providers, wireless carriers and tiny upstarts are happy to oblige, crafting new ways for consumers to buy, sell, and carry out other transactions using wireless handsets. On Apr. 2, e-tailer Amazon.com (AMZN) introduced Amazon TextBuyIt, a service that lets users purchase items via mobile text messages. The same day, Citibank (C) began a public testing of a service that lets cell phone users transfer money among accounts.
The intent of this mobile financial flurry? To get in on the ground floor of what some say will be a boom in demand for wireless payments and banking. A paltry 10 million U.S. cell phone users, or 3.8% of the total, now check bank balances, receive bank alerts, or send payments via their cell phones, according to consultancy Javelin Strategy&Research. But the tally may rise to 108 million by 2012, according to Javelin. "Momentum really has started to pick up," says Tripp Rackley, CEO of Firethorn, a mobile banking unit of Qualcomm (QCOM). On Mar. 27, Firethorn unveiled a service that will let Citibank's credit card customers check account balances via cell phone later this year.
Carriers, banks, and merchants are eager for their respective slices of the fees attached to carrying out transactions over cell phone. For carriers alone, revenue from mobile fund transfers is expected to grow to $8 billion in 2012, from $65 million last year, according to consultancy ABI Research. "The potential is there for quite a speedy uptake," says Jonathan Collins, principal analyst at ABI. The allure of mobile financial services is particularly strong for consumers ages 25 to 34, Javelin says.
Wireless carriers are particularly keen to add any application that will make cell phones more indispensable to users. Verizon Wireless, jointly owned by Verizon Communications (VZ) and Vodafone (VOD), has been offering Obopay's person-to-person payment application to subscribers since last year and introduced new banking applications, powered by Firethorn, in early 2008.
Enthusiasts for years have been talking about a boom in mobile payments that has yet to materialize. Financial services providers including Visa (V) and Wells Fargo have run trials, but many banks have yet to take most services mobile on a wide scale. Only about 28% of banks offer even basic mobile alerts. Fewer still offer more advanced features (BusinessWeek.com, 5/8/07).
A big roadblock is the possibility of fraud. Many merchants end up getting ripped off because they can't tell whether a cell phone user is capable of paying for goods sold, according to mobile content aggregator OpenMarket. So on Apr. 1, OpenMarket introduced software that will give merchants a clearer picture of whether a would-be purchaser is likely to make good on payment.
Barriers are dropping quickly in developing markets. On Mar. 27, Obopay formed an alliance with Yes Bank, India's third-largest bank, to offer mobile payments in India, where more people rely on receiving money transfers than anywhere in the world. Now the service facilitates payment exchanges within India, and later this year is due to let Indians perform wire transfers with people in the U.S. "We believe mobile payments are going to leapfrog more traditional banking services [in India]," says Obopay CEO Carol Realini.
Costs associated with offering mobile payments are falling too. On Apr. 1, Alameda (Calif.) startup Mobile Candy Dish rolled out a product called Blaze Mobile Wallet that will make it cheaper for carriers to implement so-called contactless payments, which involve swiping a cell phone across a scanner to make a purchase. "We feel that the pieces are coming together," says Firethorn's Rackley.