In the person-to-person transfer business, text messaging is so 2008.

MasterCard Inc. said last week that it will use specialized applications for smart phones as the critical component in the Mobile MasterCard MoneySend service it expects to formally unveil this month.

Most mobile transfer services use text messaging, which is widely available but can be cumbersome to use. MasterCard is touting specialized applications that make the multifunction handsets as easy to use as a computer; it says that these tools will prompt consumers to think of their phones as payment devices.

People "look at their mobile devices as, basically, a PC you can hold in your hand," Art Kranzley, MasterCard's chief emerging technology officer, said in an interview. "Whenever you have an application, it just makes a big difference in terms of the user getting it and having it easy to use. It's going to make the service a lot more convenient and there is going to be a lot more instant gratification through smart phone devices."

Last year MasterCard announced plans to develop a P-to-P transfer service in collaboration with Obopay Inc. of Redwood City, Calif.

The service will enable customers of any participating MasterCard issuer to send and receive money, either through a mobile phone or online. Bancorp Inc. of Wilmington, Del., has already signed on to offer the service with its prepaid cards, and MasterCard has said more issuers will offer the service this year.

MasterCard has released a downloadable MoneySend application for Research In Motion Ltd.'s BlackBerry phones, though it cannot be used for transfers yet. Kranzley said his company is developing versions for Apple Inc.'s iPhone and other popular models. MasterCard has also launched a Web site for iPhone Web browsers that Kranzley said could attract users before the iPhone application is released.

MoneySend will also work on any phone that supports text messaging, but that interface will not be as easy to use as the applications designed for smart phones, he said.

The MasterCard service is built on one that Obopay has been promoting since 2006. Obopay customers can use text messages or applications that can be downloaded to some handsets offered by AT&T Inc. and Verizon Wireless; the only smart phone it currently supports is the BlackBerry.

Michael E. Diamond, Obopay's senior vice president of business development, said that apps designed for smart phones open up possibilities that are not possible with text messaging or applications developed for standard phones.

For example, the BlackBerry application Obopay introduced last year lets users launch the tool from their address book, he said.

In addition to better integration with the handsets' various features, smart phone applications offer greater perceived security, Diamond said. "At the end of the day, people think, 'When I have an application, it's more secure to use.' " And having a graphical interface is "more fun to use" than a text-based one.

(Obopay's systems initiate an automated phone call to senders to verify transfers made with text messages.)

Diamond would not provide volume figures for the Obopay applications or discuss its plans for smart phones. However, he did say MasterCard's efforts in this space would help his company.

"The market is new enough," he said. "The addressable market is so large that … I see it as being really 100% complementary. It's nothing but great news for us, because they're attaching a global brand to the concept and taking it to issuers."

PayPal Inc. introduced a text-based payment system in 2006 and an iPhone version last year. In January the San Jose unit of eBay Inc. said the iPhone version quadrupled its mobile payment volume.

Kranzley said MasterCard has had success with a mobile application it released for the iPhone in April: ATM Hunter, which, true to its name, lets cardholders find nearby automated teller machines.

"When people access that and go use an ATM, we get paid for each ATM transaction, so that's a fantastic application," he said. "I hear a lot of people say … 'There are ATMs everywhere. Why would people look for ATMs on an ATM Hunter?' But they are."

Though Mobile MasterCard MoneySend is planned as a P-to-P service, Kranzley said that both it and ATM Hunter could serve as steppingstones to more robust payment systems, such as using contactless chips in phones.

"The more you have on the device, the more people will associate it with the ability of making payments," he said.

Nick Holland, a senior analyst at Aite Group LLC of Boston, said that a mobile application "is becoming more important to have, particularly through the app stores" for iPhones, BlackBerrys and other devices.

"The end user experience is critical," he said. "It has to be easy for the end user to use these services. Otherwise, they just won't bother."

That said, a payment company needs to do more than just churn out software, Holland said. MasterCard considers ATM Hunter a success and boasts of it regularly in presentations. However, according to Apple, the average rating for the tool among iPhone users was only two and a half out of five stars as of Monday.

Working through the application store environment is "kind of a double-edged sword," he said. "Unless you're on the first couple of pages, in terms of the financial services applications, then you might as well not exist."

Holland also questioned the strategy of using P-to-P tools to promote the eventual use of contactless payments from cell phones, since the industry seems to have largely stalled in its promotion of the contactless payments that are already possible through plastic cards.

"The hole in a lot of the presentations — I'm not singling out MasterCard — is this transition from contactless cards to mobile stickers to this 'box where magic happens' to mobile payments," he said. "Contactless adoption is not what it should be. Unless you're going to start issuing phones with magnetic stripes, then you're in trouble."

MasterCard said it takes months to develop each mobile tool. Holland said the company is wise to take its time to try and get it right the first time.

"Banks shouldn't touch this unless they are actually prepared to innovate," he said; since the user comments on an application store listing are as visible as the company's own marketing message, financial companies need to treat the applications as more than just experiments. "It is as much their brand on the iPhone as it is on a card."

There are advantages for companies that go the extra mile to get it right, Holland said. "The application just totally streamlines the process," and in "their strategy around mobile, I think MasterCard is probably one of the most progressive of the card networks in the U.S."

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