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Old Interface Learns New Tricks in Mobile Payments

At first glance Xipwire Inc.'s mobile payments system seems obsolete next to competing services — its software isn't based on a sleek-looking digital wallet application on a smartphone and it doesn't rely on payment chips that turn mobile devices into tap-and-go credit cards.

Rather, the Philadelphia startup's system operates through text messaging, enabling even basic cellphone users to pay one another and retailers. But unlike many mobile payments systems built with flashier interfaces, Xipwire (pronounced "zip wire") does not tie consumers to a specific payment account.

In taking a scaled-back approach, Xipwire has the potential to reach a wider consumer audience, the company's chief executive, Sharif Alexandre, said there are approximately 280 million mobile phones in the U.S., but only about 40 million are smartphones.

"You're completely discarding the other 240 million people out there that … cannot participate in a mobile payment because they don't have what it takes," Alexandre said in an interview.

Merchants can use Xipwire's system with an iPad app, an approach that sidesteps the issue of tying mobile payments to existing point of sale hardware.

"The equipment should continue to be disposable," said David Adams, the director of information technology for Starr Restaurants, an independent restaurant operator in Philadelphia that is testing Xipwire at one of its locations. "You shouldn't be tied to the hardware."

Consumers must set up a Xipwire account online in advance to send a payment. They can add up to five accounts, including debit, credit and prepaid cards and bank accounts, as funding mechanisms. They can select one account as their default funding source and can choose which account to use for each transaction. The payment accounts can be used to fund up to five digital wallets.

Paul Grill, a partner with the payments consulting firm First Annapolis Consulting, said Xipwire's approach is likely to be of interest to certain pockets of retailers, such as full-service restaurants.

However, it is likely to be surpassed by more advanced technology, such as those built on near-field communication, which would allow phones to send and receive payment and coupon information with a retailer's regular point of sale terminal.

Xipwire is a technology "we've put in the category of another type of bridge" to future services, Grill said. It "may serve a number of customer needs in the near term but may not be the one that is ultimately preferred by all consumers five years from now."

Alexandre, a software engineer, started Xipwire last year as a person-to-person payments system for everyday transactions such as splitting a dinner check or paying the gardener, which other money transfer services have targeted with little success.

While the temptation is to focus development activities on smartphones, Alexandre said his company wanted its service to be applicable to all consumer segments. "We wanted to have an interface that was familiar to people," he said. "So texting a command or texting a payment isn't something that's new to them. The interface is completely familiar."

Xipwire quickly ventured into the nonprofit sector, where it allows organizations to receive donations. Currently 30 to 40 organizations and businesses use Xipwire, Alexandre said.

More recently the company has been focusing on retailers. In August, Starr Restaurants began testing Xipwire at Pod, an Asian restaurant it owns near downtown Philadelphia.

The high-end establishment uses an app that Xipwire installed on an iPad, which allows the restaurant staff to text a payment confirmation request to a customer. Customers responds by sending a message back with a PIN confirming their identity.

Pod is located near Drexel University, the University of Pennsylvania and several hospitals.

"There's a tremendous concentration of young, hip people, if you will," Adams said. "We're hoping to provide them with a different experience … to begin with. [Xipwire] is really an entryway to bring a piece of technology that a huge number of them use or carry with them and allow them to have flexibility" when paying.

Adams, who is in favor of mobile payments technology, said his company liked Xipwire's approach because it has few barriers to customer use. "We didn't want to exclude people" just because they "don't have the right mobile device," he said.

Pod has done some light promotion of the service, including e-mail campaigns announcing the service and mentioning it as a payment option on customers' checks.

Use has been low, averaging just a few transactions per week, Adams said. "I was hoping to see closer to a dozen, but I'll take two or three, because it's such a young technology," he said. "You don't hear about it on the evening news. It's not a front-of-mind emerging technology yet."

Starr Restaurants is working with its point of sale software company Radiant Systems Inc. to integrate Xipwire's service into its program, Adams said. A Radiant spokeswoman did not respond to inquiries before deadline Wednesday.

Xipwire recently released an app for the iPhone that customers also can use to manage their mobile wallet.

Xipwire's service could be too cumbersome and restrictive for retailers that want to use mobile payments technology for loyalty and incentive purposes at the point of sale, Grill said. However, certain restaurants could reduce the time it takes for a customer to pay their bill.

"You're typically not standing there at a point of sale holding out your card," Grill said. "Someone else brings [your card] back and forth to you."

Xipwire is working on adding other business types to its service. Traders Insurance, a Kansas City, Mo., auto insurer, is planning to add Xipwire as a payment option this quarter.

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