Fast Company

Pay By Cellphone? Sounds Great. So Why Don't We Do It?

Obopay is an payment system that works on your cell phone--kind of like a mobile PayPal. The service is cheap, easy to use, and fantastically convenient. Not only that, it's well-backed; today Nokia [NOK] announced it would funnel an additional $70 million into the startup in exchange for a minority stake in the company. So why isn't everyone using this thing?

It's not just me, is it? My family and friends haven't even heard of Obopay; my colleagues show only a flicker of familiarity; my Silicon Valley friends regard it with bemused curiosity. It's no fault of the concept; mobile payments have exploded in popularity in Africa and other developing regions. Obopay itself operates in both Indian and American markets; in India, they've garnered a strong customer base. In the U.S., not so much. Why won't Americans get with it?

It's not for lack of need. For as advanced an economy as ours, paying for things is still a relative headache; many establishments are still cash only, and debit and credit cards have problems ranging from hidden fees to identity theft. Mailing checks takes forever; so do cross-bank electronic transfers.

Obopay's ideal scenario plays out at a restaurant with your friends, when it comes time to split the bill. Instead of handing over 12 credit cards or an amalgam of cash and plastic, Obopay says, have one person pay, and the rest reimburse him instantly with their cell phones.

The roadblock isn't technological, either. Americans love PayPal, with its Fort Knoxian security and easy interface. Obopay doesn't ask any more than PayPal does; create an account, charge it up with cash, and spend at will. Citibank even lets you dip directly into your bank account instead of maintaining a separate Obopay silo. And the mobile interface just requires a text message--something most of us should have a handle on by now. (That said, texting a payment won't work on AT&T, but you can also use Obopay's mobile site, or an Obopay app available for some dumbphones. A BlackBerry app is in the works.)

For the uninitiated, Obopay works like this: When I want to send you money, I compose a text message to Obopay's number, and I include your mobile phone number, the amount I'm paying you, and a short note. I send it, and you get a confirmation text. The money is immediately transferred to your Obopay account. If you don't have one, the money is held in escrow until you sign up for one (they're free.) To complete this transaction costs me, the sender, a flat fee of $0.25, and the recipient nothing.

So what's the problem here? It might be the target audience. Only amongst the under-25 set does text messaging have any primacy, and this is the last demographic that would have spare money to charge an Obopay account--and that's if they have any money that isn't superintended by their parents. The people that do have the money are seasoned enough that other forms of payment--check, cash, even RFID-enabled credit cards--pop into their heads long before something as quizzical as an SMS payment.

Another problem is that, at least in a microeconomic sense, our domestic banks actually function (except when they don't, which is, of course, another story). In the developing world, branches are fewer and further between, and wrangling a car to get to one could be more of a problem. Not only that, but local bank administrators and government overseers could be less trustworthy than they are here (shocking, I know, but really). Keeping your money with a private American corporation might seem like a better option if you live in any number of African countries, but in the U.S., it seems superflous. Our financial lives already rest on bedrock, and most of us already have a welter of online usernames, passwords, and accounts. It's almost not worth the marginal cost in mental effort--small as it may be--to make that stable financial environment more efficient.

Consumers also like adopting technologies that have a constellation of reputable partners, and Obopay isn't quite there yet. They have widgets that you can add to pages on Facebook, MySpace, Blogger, and others, and they also offer turnkey merchant accounts for small businesses. But until you can walk into Quizno's and pay for your sandwich with your phone, consumers may yet fail to think of Obopay when it comes time to transfer cash. One solution might be RFID-equipped cell phones with some kind of Obopay functionality baked in, which would let a cell phone user swipe his phone instead of his credit card. Last year, Obopay said they were pursuing this option, but nothing has come of it since. In the interim, Obopay has tried to worm its way into the retail schema by releasing a prepaid MasterCard, but that's hardly a point-of-sale innovation. 

Research suggests that mobile commerce should shoot skyward worldwide in the coming decade, even in the U.S., where the number of mobile phones isn't growing as exponentially as in developing economies. Should payment services insinuate themselves into the app stores of Apple [AAPL], RIM [RIMM], and Google [GOOG] Android, paying over a 3G connection could benefit from the do-it-all cachet of their devices, earning Obopay a window for adoption. Mobile merchant-based buying is already increasing, thanks to iPhone apps from eBay [EBAY] and Amazon [AMZN], making Obopay's prospects even brighter.

So despite Obopay's slow start in the U.S. market, their future might be bright. Unless Visa [V], Mastercard [MA], or PayPal don't find a way to dominate the market first.

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6 Comments

  • Dan V.

    This payment scheme is great! The easy-to-use internet-based text messaging can be used here. Its reliability and accuracy makes this mobile interface as easy as ABC. You can now pay at the comfort of your own home or while strolling at the park.
    --------------------
    text messaging

  • Anonymous

    My understanding is that there are several providers of SMS payment systems in the US already, not only Obopay. The reality of the matter is that SMS payments are too cumbersome and already outdated: If you are in an application and want to buy something from the web, you have to get out of the application and then do your thing with SMS, then get back into the application again. If you are out and about and want to buy something from a retail outfit you have to do your thing with the SMS instead of just swiping a card. You might as well write a check.

    The future of mobile payment already exists several places outside of the US. It's one-click payments from within the web browser when shopping online, and a swipe of the phone when out and about. What's holding it back in this country are the carriers, who refuse to release their code (API), so that all the third party providers (there are several) ready to jump on this can actually provide a service other countries already enjoy.

  • Chris Dannen

    Hi Ramy -- thanks for reaching out. Obopay's website says* it works with all carriers "except Cingular," but thank you for updating us. I'd be glad to hear more about Nokia's plans with the service, if you'd like to contact me via my FastCompany profile.

    * http://tinyurl.com/292u4u

  • Joseph Allan

    My understanding is that there are several providers of SMS payment systems in the US already, not only Obopay. The reality of the matter is that SMS payments are too cumbersome and already outdated: If you are in an application and want to buy something from the web, you have to get out of the application and then do your thing with SMS, then get back into the application again. If you are out and about and want to buy something from a retail outfit you have to do your thing with the SMS instead of just swiping a card. You might as well write a check.

    The future of mobile payment already exists several places outside of the US. It's one-click payments from within the web browser when shopping online, and a swipe of the phone when out and about. What's holding it back in this country are the carriers, who refuse to release their code (API), so that all the third party providers (there are several) ready to jump on this can actually provide a service other countries already enjoy.

  • Ramy Mora

    Chris - Thanks for the article on Obopay. I run marketing and PR for the company. Please note that our product DOES work on all ATT phones via text messaging AND a downloadable application AND mobile web browsing. There are many more "ideal scenarios" for using Obopay beyond the paying for dinner bills example you cited. Also, our vision and the Nokia announcment are much broader than this. Feel free to contact me anytime and I would be glad to brief you on our vision and answer any questions you may have about mobile payments or Obopay.

    Cheers,

    Ramy Mora
    VP, Marketing
    Obopay Inc.