MasterCard Inc.'s deal to offer issuers a mobile phone person-to-person payments service could open the door for smaller financial companies to experiment with an emerging payments market that has previously been the province of big banks.
The agreement announced Thursday with the transfer technology company Obopay Inc. is not MasterCard's first venture into mobile payments. It is already testing the use of phones for contactless purchases at the point of sale, and said that person-to-person payments are one of several ways it expects the handset to become a key component of consumers' purchasing patterns.
Obopay already offers this service on its own, and Citigroup Inc. is developing a version that will be linked to its accounts.
Art Kranzley, MasterCard's chief emerging technology officer, said some banks are already asking for such a service, and those that are not may be prompted to consider offering the Mobile MasterCard MoneySend Person-to-Person service once it is available and their customers begin using it.
"Our customers, the issuers, are telling us they want to service their customers in this way," Mr. Kranzley said. "For all of them to offer this individually would be prohibitively expensive, would take a great deal of time, and wouldn't have the interoperability" offered by MasterCard's payments network.
MasterCard, of Purchase, N.Y., is offering the service through its MoneySend remittance system. People will be able to initiate payments to one another other drawn on any MasterCard-branded card — including credit, debit, and prepaid cards — using text messages. Recipients do not have to have a MasterCard card, but they have to sign up for one to access the funds. Card account numbers will not be sent over the network.
For recipients of the funds, the service could function as a form of viral marketing. People who do not have a MasterCard account "would be instructed to sign up for the MasterCard Mobile Money Send service," Mr. Kranzley said. That strategy should attract more issuers to the service. "Other banks, when they see that, are going to want to participate."
MasterCard is in talks with several issuers about offering the service, Mr. Kranzley said. He would not name any or say when one might begin offering it.
The service is similar to but separate from the person-to-person transfer service Citi has been developing with Obopay since last year, Mr. Kranzley said.
Dion F. Lisle, a senior vice president in the growth ventures and innovation unit of Citi's global consumer group, said Citi plans to introduce its own Obopay system this summer. Citi's trial is structured to allow recipients to accept the funds either into their own Citi accounts or into Obopay accounts, but initially it will not be compatible with MasterCard's, he said, though the two companies plan to meet in a few weeks, and the topic is likely to come up.
Gregory Holmes, the president of U.S. operations at Obopay said the MasterCard agreement will generate more bank partnerships. "We've attracted a lot of interest from financial institutions," he said. "Some want to work with us directly. Others are interested in working with us through this MasterCard relationship."
Obopay offers a person-to-person payment service linked to prepaid accounts. Customers can also access those funds with MasterCard debit cards linked to the accounts.
Gwenn Bezard, a research director at the research and advisory firm Aite Group LLC, said it is still unclear who will use mobile P-to-P services, or why. "It's going to be a science project, and at best, it could be a nice business," he said. MasterCard has "nothing to lose by giving it a shot."
He compared the evolving mobile P-to-P market to eBay Inc.'s money transfer service PayPal Inc. "The users decided it would be great to use it for eBay. It was the users who took it to the next level, not management."
Mr. Lisle agreed that the market is still evolving. In the near term, customers are likely to use it to split a restaurant check, pay a baby-sitter, or send money to children at college, he said. "Eventually, you will be able to use it to pay people you don't know very well, backed up by Citi."
Mr. Kranzley said P-to-P is one of several mobile payment applications MasterCard is pursuing, including using phones to make purchases at a store or online, prepaid-phone top-ups, and direct marketing.
Consumers in Asia can use their phones to make contactless purchases at merchants, and MasterCard is testing such services in Orlando and Dallas, and expects to offer them commercially next year, he said.
P-to-P is another way to make the mobile device more powerful to its users, he said. If "people want to use their mobile devices for that, we want to support it."
