Mocapay Inc. says the key to making its mobile payment software appealing to users is security.

The Denver mobile loyalty and gift card technology vendor took the wraps off a system last week that consumers can use to make purchases with their phones. Enrolled users can get one-time codes on their phones that can be used to charge payments to prepaid accounts.

"Transactions move through Mocapay's system as dynamic cryptograms, or tokens, so no sensitive data is exposed or stored on the handset or at the point of sale," said Kevin Grieve, Mocapay's chief executive.

Mocapay was granted a patent last month for the mobile application.

Participating consumers register their phone numbers with Mocapay, enabling them to buy or receive gift cards or rewards points from participating merchants.

To initiate a transaction, participants open the Mocapay application on their phones and select the payment function. Mocapay checks the person's account balance and immediately sends to the handset a one-time-use, six-digit code that can be used to make a purchase at the point of sale.

Mocapay's one-time codes expire 20 minutes after they are issued. Consumers receive text messages confirming their transactions and updating their account balance. Mocapay settles the transaction with the merchant within one day through the automated clearing house network.

Participating merchants must download software from Mocapay and install it in their point of sale systems. Mocapay said this takes 10 to 15 minutes, though some observers have said the requirement will probably be an obstacle to widespread adoption.

Steve Klebe, a senior vice president of business development at the billing software vendor Vindicia Inc., said he has doubts about payments systems that require both merchant and consumer users to install applications. In his experience, he said, payment services using software that consumers or merchants must download or install are "hopeless" because too much effort is required. Vindicia handles recurring payments for digital goods, such as online games and software, and services, such as online dating.

But Mocapay said some merchants will be willing to make the effort because its system provides better-targeted sales and marketing opportunities compared with traditional gift cards.

So far Mocapay has signed up a handful of Colorado merchants, including the zpizza pizza chain, ShortStop convenience stores, Ink! Coffee and Doc Popcorn. Micros Retail Systems Inc., a Weehawken, N.J., technology vendor to the restaurant industry, agreed this month to offer Mocapay to its clients for promotions and loyalty programs.

Mocapay is in discussions with several national merchants that are considering adopting its system for gift and loyalty card programs, Grieve said.

It can deliver data to users' phones through several vehicles: text-messaging, mobile browsers and downloadable applications that run on Apple Inc.'s iPhone and handsets that use Google Inc.'s Android operating system.

Privately held Mocapay was founded in 2006; last fall it got $3 million in funding from Headington Group's Spartan Mobile, Lacuna Venture Fund and other ventures. Grieve, formerly an executive in First Data's prepaid card operation, joined Mocapay in 2008.