New P-to-P Service for Underbanked Looks to Launch M-Wallets

A handset-based service announced on Tuesday and aimed at allowing underbanked consumers to send money to individuals both in and outside the U.S. through Western Union locations could incorporate mobile wallets by the end of the year. That development would allow users of Trumpet Mobile, a reseller of prepaid wireless service for Sprint Nextel Corp., to send money to other persons directly, without the need for prepaid cards. It would also allow users to make point-of-sale transactions with their phones, relying either on contactless technology or PIN code capability, company officials say. “Ultimately, we want to have a mobile wallet on both sides [of the p-to-p transaction],” says John W. Carney, chief executive of Affinity Mobile LLC, the Dallas-based parent company of Trumpet. Affinity on Tuesday announced nationwide availability of a person-to-person money-transfer service involving Western Union and Radio Shack Corp., whose electronics stores sell Trumpet's phones and service. The service had been in pilot since last year. A former T-Mobile executive, Carney says his company is in talks with wireless carriers to support its service, including the launch of mobile wallets. A spokesperson for Affinity says the wallets could be introduced by year's end. Trumpet customers send money to other individuals by tapping a name, phone number, and PIN into their phones. Recipients get a text message telling them they can pick up their cash at a Western Union location and giving them the PIN, which they need to authenticate themselves. The cash comes from the Trumpet CashCard, a prepaid card issued by The Bancorp Bank, Wilmington, Del. Users can load their cards with cash at Western Union or Radio Shack locations or at merchants supported by the Green Dot prepaid reload network. But with the mobile wallets, senders would no longer need to rely on the prepaid cards, Carney says, since the funds would be carried in the wallet. This, Carney argues, could make the transactions more convenient for users and cheaper to process. “It's going to be lower-cost,” he says, because not only would the cards no longer be necessary on the send side, but recipients would be able to access their cash through a point-of-sale terminal rather than through a human agent. Receivers could perform point-of-sale transactions with a form of contactless payment technology called near-field communication or with PINs provided to merchant terminals, Carney says. An Affinity platform called MADE, for Mobile Application Delivery Enablement, manages the switching of data for the company's financial-services applications. Affinity is not the first provider of mobile services to target the underbanked market. For example, Marlborough, Mass.-based Cyphermint Inc. seven years ago introduced a service allowing consumers to make funds transfer and also point-of-sale transactions based on mobile wallets and prepaid cards. The service started in Russia but now claims 1.5 million users in the U.S. (Digital Transactions News, Sept. 19, 2007). According to statistics from the Center for Financial Services Innovation cited by Affinity, 40 million U.S. households, or about 90 million persons, are unbanked or underbanked and perform $13 billion annually in transactions. Many of these people are immigrants who rely on money transmitters to send funds to relatives in their home countries.