Obopay’s Price Hike Has Evoked No User Complaints, Processor Says

Mobile-payments processor Obopay Inc., which is increasing its fee to send money to 25 cents from 10 cents effective Aug. 7, says it has not had complaints from users despite the more than doubling in the transaction price. “We're pleased we got it right,” says Gregory Holmes, president of Obopay U.S. “It validated our research.” Holmes says Obopay surveyed its users about pricing before raising its fee and saw an opportunity to improve profitability for itself as well as for banks with which it is either seeking to form partnerships or already has, such as Citigroup Inc. The absence of user complaints, he says, “speaks to the good economics involved. We did the research and discovered the increase is well within consumer expectations.” Obopay does not charge recipients a fee to get money. Its only other fee is a 2.5% charge levied when customers use a credit or debit card to fund their Obopay accounts. The increase comes at a time when a number of startups have entered the market for person-to-person payments using mobile devices. Analysts have said the business offers a promising opportunity for processors (Digital Transactions News, March 18), but some have pointed out the difficult economics of the market in the absence of merchant fees and a so-far slow consumer take-up of mobile payments. Indeed, some observers wonder whether Obopay's decision to hike its pricing indicates it is seeking to maximize income in the U.S while it develops more lucrative markets overseas. Obopay earlier this month said it planned to cultivate a remittance corridor to India and later other foreign markets (Digital Transactions News, July 8). In contrast to the U.S. market, consumers in some overseas markets lack access to PCs and rely almost exclusively on their handsets for any online banking and payments service. In this respect, observers say, they may present a more attractive market for U.S. mobile processors. “There's room for significantly higher fees than a dime or a quarter [overseas],” says Jim Salters, an analyst at Glenbrook Partners, a consulting firm based in Menlo Park, Calif. “There is some incremental convenience [in the U.S.] but it's more about the cool factor, whereas in developing economies you have no access to [electronic] banking except through mobile.” But Holmes denies Obopay's new pricing reflects a strategic shift away from the U.S. “We're very interested in developing the domestic market,” he says. “Our efforts with Citi and the MasterCard [Worldwide] program speak to our commitment to this market.” Last month, Obopay agreed to link its platform to a person-to-person payment service MasterCard plans to launch next year as part of its MoneySend program (Digital Transactions News, June 19). Some early reports about Obopay's new pricing also indicated the company is discontinuing a service that allows users to send funds directly from their bank accounts into bank accounts held by recipients. Obopay introduced this capability in March to complement its prepaid Obopay user accounts (Digital Transactions News, April 2). But Holmes tells Digital Transactions News the new service will remain in place. Instead, the processor is discontinuing an 11-month-old test service that allowed users to designate a credit card as a secondary source of funding of prepaid accounts in cases when automated clearing house transfers could not be cleared because of insufficient funds.