MasterCard Inc. is working with a trade group to develop a way to deliver international person-to-person remittances through mobile phones.
The idea is aimed at people who have been reluctant to receive payments through cards, the Purchase, N.Y., company said Monday.
"The essence of the project is that you would have a cell phone at both ends," said Richard Fletcher, the global head of MasterCard's mobile and wireless group. "What we see in the cell phone is an excellent distribution channel."
MasterCard said it is working with the GSM Association, a trade group for mobile phone operators, to develop a pilot test of a system that lets people to send money to friends and relatives in other countries. The funds could be spent using a prepaid card, and recipients learn about payments through text messages.
The sender may be able to initiate payments through things other than a phone, but the recipient must have a mobile phone to know the money has been received, Mr. Fletcher said.
He expects the test to begin this year, though it is not yet clear where.
The trade group said 19 of its more than 700 members may participate in the test. Sunil Bharti Mittal, the group's chairman, said in a press release that the test could "lower transaction costs and provide immense benefits to people in developing nations such as India."
State Bank of India and Smart Communications Inc. of the Philippines said they would participate. Smart said it expects to work with banks in Bahrain and Italy.
Mr. Fletcher said the project must overcome a number of hurdles, because its focus "is very much on the underbanked." For example, in some countries the underbanked and unbanked do not live in areas with numerous automated teller machines, he said, and bank branches and point of sale terminals can be just as scarce.
This will be an issue with the phone test, he said, but it will be offset by the conveniences, such as allowing the sender to begin the transaction with a cell phone and giving the recipient instant notification.
Though the fees have not been determined, Mr. Fletcher said that MasterCard expects its program to be less expensive than other remittance services.
This is not MasterCard's first attempt to woo the underbanked with phones.
In November it began testing contactless phone payments through 7-Eleven Inc.'s prepaid cell phone network, Speak Out Wireless.
Mr. Fletcher said MasterCard does not expect to use contactless technology with the new project, but it is not out of the question. "There are a number of different opportunities" MasterCard could explore.
Penny Gillespie, the president of the Centreville, Va., advisory firm Gillespie International Inc., said that the project has less to do with earlier phone tests and more to do with products that put payment cards into the hands of the unbanked.
"What they're doing is they're carrying the concept of the payroll card beyond payroll and into simple money movement," she said.
Payroll cards emerged as a viable alternative to checks because "the people that didn't have bank accounts were being hit with exorbitant fees for check cashing," Ms. Gillespie said.
Cards that allow the user to spend the money directly "should be less costly to the recipient," she said. "If it's not, I don't know that it's going to be very successful."
Cell phones are a key part of this because, even though payments may be initiated through other means, phones are more common in some areas than Internet connections and can serve as an inexpensive and immediate way for the recipient to learn about a money transfer, Ms. Gillespie said.
"Consumers are driven by convenience and cost," she said.
Once those issues are addressed, MasterCard and its partners may succeed at exposing the unbanked to the benefits of bank products and services, and once the cards are in their hands, the recipients, "for all practical purposes, now have a bank account but never opened one."
