PayPal, the online payment company owned by eBay Inc., appears to be gearing up to let customers send money or order and pay for products by text message from a mobile phone.
The move by PayPal, a unit of online auctioneer eBay Inc., marks a big step in bridging the worlds of e-commerce and the physical world of brick and mortar stores by giving consumers a pay as you go option via phones, analysts said.
"PayPal is going to be launching a mobile payments product," PayPal spokeswoman Sara Bettencourt told Reuters.
The latest service dubbed "PayPal Mobile," is currently being tested by several eBay employees, and is slated to launch in the next couple of weeks in USA, UK and Canada – with over 55 other countries expected to follow suit.
According to a new section on PayPal’s Web site, mobile phone users will be able to send a text message with instructions to send money to another person, using a cell phone number to identify the recipient. The recipient will be notified by PayPal of the transaction and will be instructed how to claim the money, according to the Web site.
PayPal Mobile promises to allow people make payments, buy various items, etc, using mobile devices. PayPal Mobile offers two options for transferring funds by phone; payments can either be sent over the phone via a text message, or a call can be made to an automated customer service system, and funds can be transmitted using voice commands.
In case of either option, users have to first register their mobile devices with PayPal’s Web site and select a code to protect themselves against unauthorized users.
PayPal Mobile will also include a new service called Text to Buy. Advertisements in magazines or posters will include the words Text to Buy and a special code, the site says. Users must set up a PayPal account and activate their phones for the service and then they can send a text to the number from the advertisement to buy the product. PayPal calls the user back to confirm the order and then the product is shipped to the user.
The Web site does not say where or when the new services might become available. So far, a Text to Buy–special offers page on the Web site does not include any offers.
Word of the service had leaked out earlier when bloggers found links to test pages on PayPal’s Web site describing it. Details can be found at:
https://www.paypal.com/cgi-bin/webscr?cmd=xpt/mobile/MobileSend-outside.
The Text to Buy feature is interesting but it may be some time before most mobile customers will use it, said Daren Siddall, an analyst with Gartner. “I think we are a long way yet from getting consumers to use the mobile channel for commerce,” he said. Most mobile users still see their mobile phones primarily as a communication device, although they are beginning to experiment with using their phones to access Internet content, he said. It will take another step for most users to become comfortable with the idea of buying actual products using their phones, he said.
In addition, mobile users will have to trust the company facilitating the payment, he noted. Existing PayPal users will likely trust PayPal for such services but other mobile users could be more comfortable with a major credit card company or bank facilitating payments, he said. “There is room for other payment providers who have established brands,” he said.
PayPal already offers a Mobile service that is limited to allowing customers to check and use their PayPal accounts through a browser on a mobile phone. Earlier this year rumors began to circulate about an expansion to that service when PayPal ran advertisements looking for staff to run a new mobile group at the company.
PayPal is not the first company to offer such services. TextPayMe Inc. is one company already allowing mobile users to send money to other people via text message. A number of trials have been launched in the U.S. in places like sports arenas where visitors can pay for food or other items with their mobile phones. In some European cities, people can pay for things like parking tickets or items from vending machines with their mobile phones.
Obopay is also set to launch mobile payments with a companion debit card for purchases or cash withdrawals.
Motorola Inc. recently said it plans to introduce a mobile wallet service in the U.S. and some banks and credit card companies are said to be developing mobile payment services.
"This is very important because it is going to create awareness that your mobile phone is much more than just a device for talk," said Dan Schatt, an analyst with financial consulting firm Celent. "It allows you to make transactions."
In effect, the phone has become an electronic wallet.
PAY AS YOU GO:
"It is basically just another way to access PayPal," Bettencourt said. "It is just like in the online world when you send a payment," she said. "All you are doing is sending a payment using your phone instead of your computer."
While designed to make online payments more convenient for the nearly 100 million existing PayPal users, the move to offer a mobile payment service holds out the prospect of reaching vast markets in the developing world where phones, rather than computers, are the main way to connect to the Internet.
When introduced, mobile phone users will be able to send a text message to 729725 (the spelling of PayPal on a numeric handset keypad) with the amount of money the sender wishes to transfer and the recipient’s phone number. On the PayPal Web site, the company uses the example: "Send 5 to 4150001234."
A PayPal computer then calls back the text message sender on the phone and asks the user to enter a secret PIN to confirm the transaction. PayPal immediately notifies the recipient and tells it how to claim the payment online.
The Web site shows a second option where the customer calls 1-800-4PAYPAL, enters a secret PIN, the amount of the transfer and the phone number where the payment is to be sent.
If the user opts for text messaging, he/she has to send a text message containing the amount to be transferred and the recipient’s phone number to PayPal. The sender is then called back by a PayPal computer, and asked to confirm the transaction. Post this, PayPal immediately notifies the recipient and tells him/her how to claim the payment online.
Operators of mobile phone systems in Britain, Europe, Australia, Japan and many other parts of Asia are well ahead in investing in mobile payment services. But PayPal’s stringent verification system gives it a leg up on independent services as it appeals to a huge base of existing users, Schatt said.
PayPal says that its PayPal Mobile service might effectively transform mobile phones into electronic wallets of sorts…