Obopay Inc. is all but abandoning the mobile transfer service it offers to consumers now that it's learned — maybe too late in the game — that banks are where the money is.

The Redwood City, Calif., company plans to announce today a significantly revamped business model built around a new service that banks can offer to customers.

Obopay's move shows there is a growing consensus that consumers are interested in transfer services that let them move money directly from their bank accounts.

While the company is recognized as a pioneer in mobile person-to-person transfers, its earlier model required people to send funds through separate, intermediary accounts, and that met with some resistance. Some analysts now say the business-model transition might be coming too late.

"Initially, they were a bit premature," introducing a mobile payment system before banks and consumers were ready, said Nick Holland, a senior analyst at Aite Group LLC of Boston. But now, "you have to wonder at this point: are they late to the table?"

Holland said that Obopay's business plan and technology have appeal, but he is concerned that it may have wasted too much time on its earlier business model.

In recent years, Obopay has struck partnerships with Citigroup Inc. and MasterCard Inc., but has continued to push to consumers the P-to-P mobile transfer service it introduced in 2006. MasterCard has incorporated Obopay's technology into its own P-to-P transfer service, and Citi tested the Obopay service, but eventually concluded there was little current demand for the electronic funds transfer system; Citi wound down the test at the end of last year.

However, working with the banking company helped Obopay refine its own strategy.

To start, Obopay learned that if it wants users to embrace mobile payments, the technology has to integrate seamlessly with banks' existing mobile phone services, even if that means there is little or no Obopay branding and its payment service is overshadowed by other mobile features.

It also has to be accommodating to segments other than just consumers, namely, small merchants.

"Those are things we did for the first time with Citi and we've now made accessible to anybody that wants to come on board," said David Schwartz, Obopay's head of product and corporate marketing. "The way that people want to adopt mobile money services in the U.S. is really through their bank."

Obopay said it already has some banks signed on to deploy its new system, called Mobile Money for Banks, but it would not name them. It will stop marketing its direct-to-consumer product, though it will maintain it for existing users.

Obopay has not yet demonstrated its ability to build as big a network of users, Holland said, though it has made several attempts.

Obopay initially aimed its mobile transfer service at students and mobile carriers that targeted the young, but failed to attract a large following, he said. And in 2008, it took aim at the Indian remittance market. Nor did the Citi trial lead to a full deployment of the service, so Obopay is trying yet another business strategy.

"There's this Madonna-like reinvention that goes on every couple of years," Holland said. "They're persistent, at least."

With the new service, Obopay is also introducing a new feature, Get Paid, which small merchants can use to send invoices and get paid, with credit and debit cards, or through the automated clearing house network.

Michael Diamond, Obopay's senior vice president of business development, said merchants could be a lucrative market.

"Mobile merchants are highly banked," he said, and they perform far more transactions than even banked consumers.

It was the Citi trials that led Obopay to realize its product appealed to this segment, which he calls "informal merchants," because they do not have the scale to justify investing in a conventional point of sale system.

"We saw those people find their way to this," he said. "We learned a lot from those trials."

Diamond would not say how many merchants — informal or otherwise — used Obopay during the Citi trials, but said it was meaningful enough to prove Obopay's appeal to the segment. He also would not estimate how much revenue Obopay expects from merchants, except to say it should be "very significant."

Citi ran a small test of the Obopay system in 2007, and expanded it significantly in 2008. In the larger program, Obopay enabled transfers to and from users' existing Citi accounts, a setup that offered more flexibility than the original Obopay service, which required separate, prepaid accounts.

However, Citi's Obopay service was not part of the banking company's primary mobile offering, and Diamond said this limited Obopay's ability to reach Citi customers.

Merchants did embrace the service, however, even though Citi did not market specifically to them; in March, Diamond called those users "our salmon who were swimming upstream to find the service."

The consumer-direct model still has value for Obopay, but not as a direct revenue generator, Schwartz said.

"It's more of a proving ground and a Petri dish," he said.

Obopay is one of several companies offering or developing mobile transfer services that link to consumers' primary bank accounts. MasterCard announced such a service last year, using Obopay's software, that can connect almost any MasterCard debit or credit account, and Visa Inc. offers a similar service abroad and is testing it with U.S. Bancorp.

Fidelity National Information Services Inc., CashEdge Inc. and Fiserv Inc. are all pushing to their bank clients P-to-P transfer services that connect directly to users' bank accounts.

PayPal Inc., which has long offered an online P-to-P payment service, is now working with FIS to provide its service to the Jacksonville, Fla., technology vendor's bank clients. Anuj Nayar, PayPal's director of communications, would not comment on Obopay specifically, but said from Pay-Pal's perspective, "it's a win-win to work with banks."

Aaron McPherson, a research manager for payments at the research firm IDC Financial Insights, said Obopay has woken up to the true potential — and limitations — of its initial service.

"They've obviously learned from their experience with Citi," he said. "They wouldn't have done this unless they thought that they would get a lot more volume."

However, McPherson was concerned about Obopay's strategy of selling directly to banks. It would have more success if it were to partner with mobile banking software providers rather than integrate its product on a case-by-case basis with each bank, he said.

McPherson said Obopay's focus on merchants could prove crucial to its growth. "The opportunity is really addressing the gray area between consumers and business: what I call the occasional seller … these are not people who are merchants, but they are people who might want to take a payment."