Obopay Moves to Allow Direct Payments from User Checking Accounts

In a move that it hopes will attract more users to its mobile-payments product, Obopay Inc. is allowing account holders to send money to other persons directly out of their checking accounts. In a further change, recipients of these transfers no longer need to have Obopay accounts and may have the funds deposited directly into their checking accounts. The move streamlines a process that formerly included an intermediate step consisting of a transfer of funds into the sender's prepaid Obopay account. Transfers to other parties then took place out of these stored-value accounts. And, starting Thursday, recipients who are notified they have received money will be able to give routing and transit numbers and other details from their mobile phones to make deposits to their checking accounts. Until then, they are using Obopay's Web site to give these instructions. The new method took effect in March. In a related development, Obopay and Citgroup Inc. announced on Wednesday that the banking giant will start this summer a consumer trial for an integrated Obopay mobile-payments product linked to Citi checking accounts. The trial follows pilots the bank ran last year with Obopay in Boston and Chicago. Irv Henderson, vice president of product development for Redwood City, Calif.-based Obopay, says the decision to directly tap checking accounts is a response to consumer research the company conducted in November. Users, he says, wanted to be able to use bank accounts they had already created. “For people who are using [Obopay] like a simple wire transfer, we heard they want to use their checking accounts whether as sender or receiver,” he says. “What resonated with us was the need to give senders and receivers more flexibility.” Henderson says Obopay also hopes the streamlined system will appeal to more users and increase activity by existing ones at a time when competition in mobile-payment processing is heating up. “We continue to chip away at the barriers [to adopting mobile payments],” he says. The company is closely monitoring activity to see if it is picking up the expected gains, Henderson says, but adds it's too early to say. The company plans to do another user survey around the middle of April, he says. “Ease of use and convenience, that's what I'm really measuring for now,” says Henderson. Obopay will not release how many accounts it has. Three-year-old Obopay allows handset users to send money to each other?and, in some cases, to merchants?through text messages, through a wireless application protocol site, or through its own application on the phone. With the transfers between checking accounts, Obopay is using the automated clearing house network to initiate debits from senders' accounts; depending on the riskiness of the sender, it may then initiate immediate credits to receivers' accounts or wait until it has received funds from the sender. “We'll be taking degrees of risk with that product,” says Henderson. In the Citi pilot, this transfer is streamlined further because Citi can authorize sender payments, he adds. Obopay's fee schedule is not changing: Senders pay a fee of 10 cents per payment, while transactions are free to receivers; those who fund their accounts from credit or debit cards pay a fee of 2.5%.