Obopay Inc. has stepped up its efforts to encourage adoption of its nascent mobile phone payment service.
In recent days the company has added to the menu of tactics and partnerships it will draw upon to court young people in particular to use its namesake system. At the same time, it says it aims to enlist banks as partners, and it already has one lined up - though it declined to name the institution.
Obopay's interest in the youth market - in combination with its willingness to partner with banks - is noteworthy because many banks have expressed concern they have not done enough to bond with the next generation of customers. Analysts disagree over how successful Obopay's approach will be, not least because Obopay faces a broad range of competitors in the mobile and person-to-person payments space.
Still, the fact that one bank has signed up as a partner suggests that Obopay's message has started to find an audience.
To date, the Redwood City, Calif., company's system has been used to facilitate person-to-person cell-phone payments through partnerships with carriers, including Cingular Wireless LLC and Helio LLC. When users sign up for an Obopay account, they also receive a debit card. The system works using text messages on any cellular network, and the partnerships allow the carriers to distribute software that makes Obopay payments easier.
Obopay's demographic approach to marketing its system has included an effort to position itself as the dominant provider on college campuses.
Young people "are early adopters of all things mobile," said Howard Gefen, Obopay's executive vice president of corporate marketing and business development. "Using their phone to transfer money makes sense to them intuitively. They don't want to carry around their wallets. They typically only carry around their phones."
Last week it announced that Helio, a joint venture of SK Telecom Co. Ltd. of Korea and the Atlanta Internet service provider EarthLink Inc., is allowing such downloads. So is Amp'd Mobile Inc., under a similar deal announced in July.
Cingular also allows the downloads, but Helio and Amp'd, which target young users, are the only carriers actively promoting the feature.
Obopay also began last week to allow what it calls sponsored accounts for users under 18. Though only adults can open their own Obopay accounts, parents now set up these sponsor accounts, enabling them to send money to their children using their cell phones. The money, as with a standard Obopay account, then can be spent through a MasterCard-branded debit card.
The account's sponsor would have control of the account, similar to a joint account at a bank, Mr. Gefen said.
Obopay hopes to build a strong base of young users, but Mr. Gefen would not say how many users it has, either through the Amp'd relationship or otherwise. To further help it add users, a bank will begin promoting the service in the first quarter of 2007, he said.
"You'll actually see a large banking relationship we'll announce in the next few months, and that will change things significantly," he said.
Mr. Gefen said Obopay and the bank partner would have a marketing relationship similar in some ways to Obopay's arrangements with carriers like Helio and Amp'd. As with carriers, a bank that agrees to promote Obopay can receive a fraction of the system's transaction fee, which is charged to people who send money. Mr. Gefen said the bank relationship is "pretty deep" and would create "a co-branded Obopay service."
These concessions ultimately benefit Obopay, he said. "Marketing relationships drive more users."
As for the dream of being used as a college campus payment system, Mr. Gefen said Obopay is not emphasizing that today, because college students who use Obopay can use the debit card wherever they please, and the more important priority is to develop the user base.
Dan Schatt, a senior analyst for the Boston market research firm Celent LLC, said young people favor cashless payments, such as with a debit card, and may be drawn to Obopay for this reason as well as for its "wow factor."
Banks may take interest too, he said, but Obopay will probably be more appealing to smaller institutions. "Smaller banks that don't really have a card portfolio that want to attract this generation will do well by getting into prepaid, and Obopay is a potential relationship," he said.
However, larger banks may not like Obopay's terms. "I don't think it will necessarily appeal to larger banks as much because they may view it as relinquishing too much control and relinquishing too much in fee revenue," he said.
At this point the best tack for Obopay is to build its user base, Mr. Schatt said. "Right now they're kind of wrestling with that chicken and egg," he said. "You've got to get that user base, and they're doing everything they can."
Gwenn Bezard, a research director at Aite Group LLC of Boston, expressed skepticism about the business model.
"It's a natural segment of the population to target, to go after the youth," Mr. Bezard said, but, "I actually don't really believe that you can drive and build a successful payment business by going simply on demographics."
Obopay needs to find a payment niche instead of a demographic niche, he said. PayPal Inc. had similar roots as a company that enabled users to zap money between personal digital assistants, but quickly abandoned that model when it realized it could address a need in the online auction space, he said.
PayPal has been a unit of the online auctioneer eBay Inc. of San Jose since 2002. Despite PayPal's efforts to grow beyond auctions, most of its revenue still comes from that market, Mr. Bezard said.
At this early stage, however, Obopay's marketing deals can only help it, Mr. Bezard said. "When you don't make money, you're always willing to share revenue," he said. "It's like stock options."
Ultimately, "I applaud their system," he said. "I would love to use that to split a check," but "it's not a big enough problem to solve. ... For a payment method to take off, it has to solve a problem."
Obopay's method is one of many attempting to bring the financial world to cell phone screens. Others, like PayPal Mobile, support person-to-person payments like Obopay does, but PayPal's focus is on retail transactions. It has worked with major retailers and charities to build its service, which allows people to mail-order products by keying numeric codes from advertisements into their phones.
Other services aim to bring standard banking features, such as balance inquiries, to the cell phone and building payments on top of that. Still others are attempting to put a payment chip inside the phone so that the handset can be used like a contactless credit card.
