MasterCard Plans to Have U.S. P-to-P Service Launched by Early ’09

Eyeing opportunities in the U.S. person-to-person payments market, MasterCard Worldwide announced on Thursday it plans to begin testing a service based on mobile phones later this year and introduce a commercial service early in 2009. The card network will use its existing MoneySend remittance system to clear and settle transactions, while relying on Obopay Inc., a Redwood City, Calif.-based mobile-payments processor, to provide the connection from consumers' handsets to MoneySend. MasterCard is talking to member banks about offering the product to their customers. Simon Pugh, group head of mobile at MasterCard, won't project how many banks or consumers might adopt the service, but says, “We're in discussions with a number of our members who are interested. There is consumer demand and desire to be able to pay from the mobile phone.” Person-to-person (P-to-P) payments, in which one individual electronically transfers money to another, are typically offered by processors as a loss leader or add-on to a broader payments product, since the P-to-P payments generally don't generate enough income from consumers to be a standalone business. MasterCard will charge participating financial institutions fees, Pugh says, though he won't disclose them. “We intend and expect to make money out [the new service],” he says. “It's not a loss leader.” Though MoneySend has been in existence for several years in Europe and Asia, Pugh says the new venture represents the first time MasterCard will have deployed it directly to consumers. It will also be the first time MoneySend has been linked to mobile phones. “We've had the capability for some time to do account-to-account transfers,” he says. “What we've not done is launch that as a direct consumer service. We're ready to offer a compelling service to consumers and make it easy for our members.” By using Obopay, he says, MasterCard gains valuable time that otherwise would have to be spent in technology development. Obopay will provide the technology necessary to register users for the service and will pass transactions to MoneySend for clearing and settlement. “We don't have a front-end component,” Pugh says. “We could have built this [capability] ourselves, but the challenge for us was how long would it take. For speed to market, the better approach was to partner.” With the new service, any MasterCard member institution in the U.S. will be able to offer its MasterCard accountholders?as well as checking-account holders who are not MasterCard account holders?the ability to send money to other persons through their cell phones. Users will fund transactions with their MasterCard credit, debit, or prepaid accounts, or from their checking accounts. MasterCard's network handles clearing and settlement for all payments, including transfers from demand-deposit accounts. Recipients must have a MasterCard card account to access the funds; those who don't will be prompted to open one. Pugh says integration requirements for banks will be “minimal,” and will depend on whether they want to register users for the service through their existing online-banking programs or via a separate Web site. Users will access the service either by sending a text message or by visiting the bank site on the mobile Web. While Obopay in this case will not be processing transactions, it introduced earlier this year a capability for its senders to fund transfers directly from their checking accounts, and it has been working with Citigroup Inc.'s Citibank unit to offer the same service (Digital Transactions News, April 2). The advantage of the Citibank version of the service is that the bank has visibility into senders' accounts, reducing the risk of non-sufficient funds. The new MasterCard product would enjoy the same advantage, since it depends on the participation of member issuers.