Citigroup, the first major bank to evaluate mobile transfers, determined that even the people most likely to consider their phones a useful way to send money are still years away from embracing the technology.

Citi quietly shuttered a two year old program in December, concluding that consumers are only starting to understand the capabilities of the increasingly sophisticated phones that are now becoming common.

"The market just isn't ready for it yet," says Jeff Semenchuk, head of Citi's new growth ventures unit. "U.S. consumers are now just getting comfortable with using their mobile phone for a lot of things." But for mobile transfers, "the demand is not yet explicit."

Citi is still committed to the concept, and is even an investor in the company that pioneered mobile transfer technology, Obopay.

Numerous financial companies are offering or developing mobile transfer services, but Aaron McPherson, a research manager for payments at the Framingham, Mass., research firm IDC Financial Insights, agrees that few people are clamoring for such capabilities.

"I realize these are new services," he says, "and maybe next year we'll see a much bigger number, but as yet we do not have any data that I'm aware of that will give us confidence that this is going to be a volume application."

Semenchuk would not say how many users were attracted to its test of Obopay's transfer technology, or how much money was moved, but he did say it was a statistically significant number. He says Citi learned that payments are not, in the minds of consumers, a standalone product. Another hurdle was Citi's requirement that at least one of the users have an existing Citi account, which Semenchuk says limited its appeal. For mobile payments to take off, "lots of banks need to participate." Though Semenchuk would not predict when Citi would again test such a service, but was certain that the question is `when' rather than `if'.

Michael Diamond, svp of business development at Obopay, says the service would be more effective if it were better integrated with banks' other mobile offerings. And stronger promotion efforts from banks wouldn't hurt, he said. Outside the United States, there are other opportunities besides check replacement. For example, in areas where there are fewer payment options, Obopay could be an effective cash substitute or a retail payment system, Diamond says.

Citi has come to the same conclusion, Semenchuk says. "Where we are spending more of our energy, to be honest, is outside the U.S."

McPherson says the United States is far less equipped for mobile payments than most people assume. In a survey of a random sample of 1008 U.S. consumers, he found that just 12.5 percent had a smart phone with a data plan. Though services like Obopay do not explicitly require smart phones, they increasingly cater to smart-phone owners. Obopay launched an app for Apple Inc.'s iPhone in December, and PayPal revamped its iPhone app to take advantage of smart phones' features, such as a tap-to-pay service that uses a phone's motion-detection ability.


Daniel Wolfe is a writer for American Banker.

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