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Forming a mutual-aid society of sorts, mobile-payments technology provider Obopay Inc. and payment processor First Data Corp.’s Star electronic funds transfer network on Wednesday announced that Obopay’s new Mobile Money for Banks service would incorporate Star’s Expedited Transfer Service. The arrangement potentially gives Obopay as it ramps up its U.S. presence access to tens of millions debit card holders for account-to-account transfers from smart phones. And for Star, partnering with Obopay will spare banks regulatory hassles and the need for back-office operations for an expedited transfer product.
The new service through Star is a component of the Mobile Money for Banks product suite that Redwood City, Calif.-based Obopay announced last spring (Digital Transactions News, May 11). “They [banks] have greater ability to make their account the center of their ecosystem,” David Schwartz, Obopay’s head of corporate and product marketing, tells Digital Transactions News. “They can leverage the Star connection that they’ve established.”
Star has about 4,800 financial-institution members serving about 80 million debit card holders, says Star vice president of product management Julie Saville. Transactions will be “in real time, which is really our advantage,” she says.
Many members have expressed interest in the expedited service since Star relaunched it about 18 months ago, but actual adoption has been relatively low. Banks and credit unions don’t want to deal with regulations covering money transfers for non-customers, Saville notes. Obopay, however, has the requisite state money-transfer licenses, which solves that problem. Plus, connecting to Obopay spares a financial institution the need to make various operational changes in order to plug into the Star transfer service. “What they’ve been looking for is some help in putting it all together,” she says. Adds Schwartz: “There’s nothing new operationally that they have to do.”
Financial institutions put their own brand on the service. Some banks are “actively interested” in the service and others have even gone live, Schwartz says. He would not identify any ahead of their own announcements.
Transactions go in real time over Star’s EFT rails, which Obopay and Star say is faster than an automated clearing house transaction. Star’s members can offer their customers the ability to initiate both outbound and inbound expedited transfer transactions, so Star cardholders can send funds to their own or other people’s Star accounts as well as pull money from their Star cards into another account, according to Obopay. Users don’t need to enter their Star PIN as they would for an ATM or debit card transaction, but they do need to enter their Obopay PIN.
Each financial-institution user determines its own retail pricing. They get a discount off of Obopay’s pricing, which for sending money is 25 cents for transactions of $10 or less and 50 cents for higher amounts.
The deal “from a technological and operational perspective … is a meaningful development for both Obopay and Star,” Red Gillen, an analyst with Boston-based Celent LLC who follows alternative payments, tells Digital Transactions News by e-mail. “For Obopay, it is the first set of teeth behind their new strategy to support banks rather than semi-compete with them. For First Data/Star, this announcement creates the ability to sell a new product in the ATM/debit market where functionality is relatively staid.”
The service’s success is not assured, however, Gillen adds. Star has much less brand awareness than Visa or MasterCard, he notes, and many consumers are unfamiliar with electronic payment services for sending money to others. “As a result, extensive marketing will likely be needed to launch this effort,” he says.
Obopay’s deal with Star is non-exclusive, but Schwartz wouldn’t say if other EFT networks would offer account-to-account transfers. Obopay is working with Star, Pulse, and NYCE on the person-to-person component of Mobile Money for Banks. Obopay’s new services are available through applications for Apple Inc.’s iPhone and the BlackBerry from Research in Motion Ltd., through the mobile Web or by telephone, or through Short Message Service, the technology behind text messaging.
