Online payment company PayPal said this week it was preparing to offer a service for consumers to make purchases or money transfers using simple text messaging via mobile phones.
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.
The service, known as PayPal Mobile, will be launched in the next couple of weeks in the United States, Canada and Britain. Other markets worldwide will follow for the world's biggest online payments service.
"PayPal is going to be launching a mobile payments product," PayPal spokeswoman Sara Bettencourt told Reuters.
Word of the service had leaked out earlier on Wednesday when bloggers found links to test pages on PayPal's website describing it.
Over time, the company may look to extend the service to the more than 55 countries and regions where PayPal is registered to transfer funds online, Bettencourt said. However, she stressed that PayPal has no specific plans to do so yet.
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.
PayPal Mobile will offer customers two options for transferring funds, be it for gifts or purchases, by phone to nearly anyone they choose, whether individuals or retailers.
Payments can be sent over a phone via text message or by calling an automated customer service system and using voice commands to transmit funds, according to PayPal's site.
"This is very important because it is going to create an 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.
In the United States, start-up TextPayMe now offers a PayPal-like service that allows consumers to send send payments via text messages. Obopay is set to launch mobile payments with a companion debit card for purchases or cash withdrawls.
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.
PAY AS YOU GO
One feature, called Text to Buy, would allow magazine readers, for example, to buy advertised items such as clothes, concert tickets or music or movie-video discs using their mobile phones, by sending product codes located in the ads.
A merchant receiving such a payment would then ship the product to the address stored in the PayPal user's account.
"It's basically just another way to access PayPal," Bettencourt said. "It's 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."
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 website, 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 website 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.
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