The person-to-person payments company Obopay Inc. has a new tool to reach the underbanked, a market it never intended to pursue.
Obopay's original strategy for marketing its prepaid debit accounts that can be managed through mobile phones focused almost exclusively on college students. But in August the company said a quarter of its users had few, if any, banking relationships, and were using its payment system not to split such small expenses like restaurant bills, but to share rent, car payments, and other major monthly bills.
By partnering with the prepaid card provider Green Dot Corp., which has a significant user base among the underbanked, Obopay is now going after the customers it has attracted rather than its initial target audience.
"We've definitely seen a pickup of new customers from the Green Dot partnership," Ramy Mora, Obopay's vice president of marketing, said in an interview Monday, "especially among the underbanked."
In the summer Obopay began letting people reload their accounts through Green Dot's MoneyPak funding product. It started wider promotion of this capability last week. Mr. Mora said that average funding through MoneyPak is more than $150, and that the number of funding transactions through Green Dot has been increasing at about 90% per month since the capability was added.
Previously, Obopay accounts were funded mainly from a bank account, though many underbanked users found other ways to do so, such as direct deposit of their paychecks.
Users can manage their Obopay accounts and send money to one another with their mobile phones, or make purchases using a linked MasterCard Inc. debit card.
Obopay, of Redwood City, Calif., is still marketing its payments service to the college crowd, but its strategy has "evolved into other segments," Mr. Mora said. "With Green Dot we're obviously marketing the product slightly differently, to the underbanked."
Mark Troughton, the president of cards and network for Green Dot, of Monrovia, Calif., said that Obopay appeals to the underbanked because they like being able to manage their funds through their phones. "It's really about convenience," he said. "At the end of the day, if these are cell phone users, and they want to drive activity off their cell phone," they may choose Obopay over a traditional prepaid account.
"As you think about the underserved market, there's massive penetration of cell phones," he said. "The idea of running payment services off a cell phone is compelling for this segment."
Red Gillen, a senior banking analyst for the market research firm Celent LLC, said that in reaching the underbanked, "Obopay has kind of stumbled upon this market, and it makes a lot of sense."
Underbanked users are likely drawn to Obopay's person-to-person payments function, though not for the same expenses as Obopay has marketed, he said.
"With the unbanked, there is a lot of expense sharing, anything from rent to an auto loan," he said. Obopay "has some attraction there. That's not social, like going out to dinner."
A MoneyPak typically costs up to $4.95, though Obopay is offering people a $4.95 refund for the first time they use one to load an Obopay account, Mr. Mora said.
Obopay is also angling for other markets, including teenagers, Mr. Mora said. Parents like the service because it helps them track their children's spending, he said. "Obopay has a much broader appeal than we ever anticipated."
It hopes to reach online merchants as well, and by yearend it expects to roll out an Obopay Checkout tool that will enable Web sites to accept payments from Obopay accounts. Mr. Mora would not say which merchants would use it, but said the company is focusing on ring-tone vendors and others that serve cell phone users.
Nick Holland, a senior analyst at Aite Group LLC, said the Green Dot deal signals a change in how Obopay thinks about customers.
Obopay had earlier worked primarily with cell phone service providers, which Mr. Holland said was constricting. "They need to tap a broader audience than just the subscribers of Helio or Amp'd or even Verizon," he said.
He also discounted Obopay's vision of person-to-person payments. "The whole splitting-a-dinner-check thing is null and void," Mr. Holland said. "I don't think anybody really does that."
Obopay's uses for the unbanked and teenagers are much more promising, he said, since the company offers "a real solution to something that is required on the market."
But its work is far from over. "They still need to get as many users in the market as possible," he said. "It's still something that has far from caught light."
Mr. Gillen said Obopay could market itself as an alternative to standard payroll cards. "Payroll deposit is supersticky. You really want it," he said. It also should find alternate ways to enroll beside the Internet.
"They should definitely be moving in the direction of going after the unbanked more aggressively," Mr. Gillen said, but to do that Obopay still needs a better grasp of its own product.
"Is Obopay a P-to-P company with a card attached to it or a prepaid company with P-to-P attached to it?" he said. "I don't think Obopay's figured that out yet."
