Since 2001, MasterCard cardholders have had the ability to send each other money on their MasterCards -- from a bank branch, an ATM or a PC -- using MasterCard's MoneySend service on its card authorization network. But a new option to originate transfers via text message from cell phones may make person-to-person payments more popular.

By leveraging MasterCard's service for the p-to-p aspect of mobile payments, banks can quickly, with little software development, repurpose the existing MasterCard authorization network for payments that today would be made by check -- and banks are as keen to exit the low-margin check processing business as they are to enter mobile banking. MasterCard is working with Redwood City, Calif.-based Obopay, which already claims connections to all the mobile carriers. Along with a standard systems interface, MasterCard banks potentially will get a group discount rate for the Obopay service.

On the other hand, banks must weigh whether the MasterCard service will be worth MasterCard's (undisclosed) fee and whether Obopay -- which has access to the Automated Clearing House (ACH) as a licensed money transmitter in its own right -- is friend or enemy. Consumers already using Obopay directly since 2006 must fund a special Obopay account before sending p-to-p payments via their mobile devices, at 10 cents a transaction. It is unclear whether banks will earn fees for payments sent over the MasterCard-Obopay service unless they charge their customers for the service. Fund recipients, who must be enrolled in the MasterCard program, can go straight to an ATM to withdraw cash or can simply spend the extra credit added to their MasterCard accounts.

The real-time card-to-card payments may appeal more to consumers than the payments Obopay offers on its own, which typically take as long as a check to clear (via the ACH). Similarly, the MasterCard service arguably is preferable to the likes of PayPal, which involves moving money in and out of a feeding account to a bank account. These advantages might prompt more people to sign up for bank-issued MasterCards, while cell phones as banking/payments devices hold the possibility of moving some of the unbanked out of a cash culture.

"The [Mobile MasterCard MoneySend Person-to-Person] service will be launching early in 2009," says Simon Pugh, SVP of mobile payments with MasterCard. The company is "in the sales process with a number of financial institutions" since it announced the offering in late June, he adds.

In the likely MasterCard-Obopay model, a payer would text a payment request to Obopay, which would instruct MasterCard which accounts to debit and credit. Once Obopay gets the OK, it would notify the recipient by text message.

'The Time Is Right'

MoneySend is "a capability we've had since 2001. We've done a number of pilots overseas," Pugh says, adding, "We haven't made a commercialization decision yet." But, he predicts, "A mobile [device] will be the hook" for adoption.

Asked why this will be the commercial success MoneySend has not been, Pugh says, "The time is right. The interest is there to bring mobile payment capability to the market."

Pugh emphasizes the convenience of p-to-p payments via cell phone. "This fits any situation where someone would write someone else a check today -- a birthday or something -- but not bill payments," he says. "You can do it on the train on your way home. You don't have to wait -- you don't have to go anywhere or log on to your bank's site."

Of course, that's once the sending and receiving parties have registered at the outset for the new service. Both must also have MasterCards from issuing banks that have signed up for the program.

According to Needham, Mass.-based TowerGroup, there was a fivefold annual increase in the number of U.S. mobile banking users last year, and Nielsen says 9 million Americans made a purchase from their mobile devices in the first quarter of 2008.

This summer Citigroup plans to launch a separate, but similar, Obopay service allowing Citi customers to send funds to any bank's customers.

John Gauntt, a senior mobile analyst with eMarketer, says, "Obopay is getting some kind of transaction fees for processing transactions, and the issuing bank gets float." However, the real prize, he adds, is a future customer, possibly someone unbanked, such as a college student. "The road to digital cash is littered with corpses," Gauntt says. "The next logical platform is the mobile phone."