Obopay Turns Mobile Phones into Banks

In much of the developing world, bank branches are scare. Obopay aims to fix the problem by making increasingly ubiquitous cell phones into virtual bank offices

Computer scientist Carol Realini was planning to take early retirement after Chordiant Software (CHRD), a customer-relationship management software company she chaired, went public in 2000. Relishing her newfound freedom, Realini went on a social-action mission to Africa. The experience was eye opening, to say the least: In the Democratic Republic of Congo (formerly Zaire), she saw people haul sacks of devalued currency to local vendors to buy scratch cards that would provide a few minutes' calling time on their mobile phones.

Pondering that image, Realini wondered why mobile phones couldn't become defacto banks, allowing people to move money around in ways they never could before. "I could imagine this transforming into a banking system that could serve billions of people much more easily than [I could see] Wells Fargo (WFC) branches being built in remote villages," says Realini.

That's the idea behind Obopay, a mobile-payment service that allows users to send and receive money via text messages and the Internet. Founded in 2005 by Realini, now 55 and the company's chief executive, Obopay already offers services in the U.S. and India. Its technology also powers the mobile-payment systems of Mastercard (MA) MoneySend in the U.S. and Nokia (NOK) Money globally.

Its biggest impact, though, is likely to come in emerging economies, where few people have access to basic financial services but a growing number have mobile phones. Obopay plans to expand soon to 10 additional countries, including several in Africa.

no accounts, nominal transaction fees

To that end, Obopay has partnered with Grameen Solutions, a unit of microfinancing pioneer Grameen Bank, which was founded by 2006 Nobel Peace Prize winner Muhammad Yunus. The goal: to use mobile technology to deliver banking services to a billion of the world's poorest people by 2018. Obopay is one of 26 companies named on Dec. 3 by the World Economic Forum as Tech Pioneers that are offering new technologies or business models that could advance the global economy and have a positive impact on peoples' lives.

Obopay's service is simpler and cheaper than traditional wire-transfer services. Transaction fees are nominal, and customers need only a mobile phone—no credit history or bank account is required. Unlike some mobile money-transfer services run by banks and mobile operators in developing countries, Obopay is not tied to any bank or operator, which broadens its appeal.

Customers worldwide can put money into their Obopay accounts with cash paid to a local vendor, via direct deposit from an employer, or by transfer from a credit card or an existing bank account. They can then send money to any text-message enabled mobile phone. In the U.S. Obopay charges 25¢ to send any amount up to $1,000, and nothing to receive a payment.

The privately held company, which does not disclose revenues, has raised over $100 million in financing. Investors include Nokia, mobile phone chipmaker Qualcomm (QCOM), Silicon Valley venture capital firms Redpoint Ventures and Onset Ventures; Citibank (C) and French bank Société Générale (GLE:FP); and Wolfensohn & Co., a boutique investment firm founded by former World Bank chief James D. Wolfensohn.

a lineup of well-funded competitors

Nonetheless, Obopay faces potentially tough competition from the likes of online money transfer service PayPal (EBAY), which has been trying to build a mobile version; London-based Monitise (MONI:LN); and San Francisco-based BOKU, which has offices in Europe, Asia, and Latin America and is funded by well-known Silicon Valley entrepreneurs and global venture capitalists Benchmark Capital, Index Ventures, and Khosla Ventures.

What's more, Western Union (WU) and the GSM Association, a global trade group representing over 750 mobile-phone operators, are working to develop a common framework that operators can use to provide money-transfer services to their customers. Britain's Vodafone (VOD), India's Bharti Airtel, and the Philippines' Globe Telecom (GLO:PM) and Smart Communications already have signed up.

"A lot of people are going after the global banking opportunity," concedes Realini. But there's plenty of opportunity. Worldwide, an estimated 2.5 billion adults lack basic banking services—a huge untapped market. Realini predicts that the convenience of mobile-payment services also will appeal to people who already have bank accounts. "In 10 years we won't have wallets. All of our money will be on our mobile phones," she says.

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