Financial companies are trying to jump-start efforts to use cell phones for mobile payments here.

The concept has been popular abroad for some time but has yet to catch on in this country, and industry watchers are divided over whether mobile phones have a place in the U.S. payment system. But as the devices become a critical element of consumers' daily lives, storing everything from phone numbers and personal schedules to digital music and photos, some companies say that using them to initiate payments is a natural fit.

Last week the Palo Alto, Calif., start-up OboPay Inc. said it has developed a mobile phone payment service focused on students. Last month PayPal Inc. said it is testing a service that uses text messages to authorize purchases. Vayusa Inc. is already operating a service in Boston that lets people use their phones to authorizes purchases at the point of sale.

Pete Hosokawa, the chief financial officer for OboPay, said in an interview that U.S. consumers are ready to adopt phone payment systems. "The cell phone is, to some extent, beginning to replace what's happening with the PC or the Internet" for both communications and purchases.

OboPay will begin offering a prepaid MasterCard International card April 15, and users will be able to download to their phones software enabling them to transfer funds from one person's OboPay account to another's. Cardholders would also be able to authorize transfers with text messages, even if they do not have the software.

Mr. Hosokawa said the software's graphical interface is easier to use for initiating payments than text messages. The software will also show account balances and a user's last five transactions.

OboPay is in talks with several universities to connect its system to a school's student accounts. Mr. Hosokawa said students could call in a lunch order at a participating restaurant and use their phones to authorize the payment from their account.

"We can Obo-lize a campus card and provide a view to it with the mobile device," he said.

Students, who are often quite dedicated to their mobile phones, are an ideal target market for mobile payments, he said. A class of 32 students at Washington University in St. Louis tested the technology last year, but it was not connected to any payment systems; the test was limited to making pretend person-to-person payments.

Last month OboPay received $10 million of funding from three venture capital companies: Redpoint Management LLC of Menlo Park, Calif., OnSet Ventures of Menlo Park, and Richmond Management LLC of New York.

OboPay's text-message system is similar to the one PayPal announced last month, but the San Jose unit of eBay Inc. is targeting different types of transactions.

PayPal said it was testing a system that would let people make purchases using funds in their PayPal accounts. Merchants would include a code in their offline advertisements, and customers would use that code to order goods through their phone.

The system will also let PayPal users send money to each other using text messages.

PayPal is an Internet payment giant, but its offline efforts have been less widespread. It offers business customers a PayPal debit card that deducts money from their PayPal account, but that product is available only to people with a "premier" or "business" account (which, unlike a personal account, carry fees) and is designed to promote using the account as a company's primary account.

Amanda Pires, a PayPal spokeswoman, said the service it is testing, PayPal Mobile, will have a different focus. "It's more of a consumer/buyer service right now. This is what our customers wanted on the buyer side."

Vayusa is also trying to link mobile phones to prepaid accounts. People can use the Newton, Mass., company's MobileLime service to authorize purchases with their phones, which can also be linked to merchants' loyalty programs to receive coupons by text message.

The company's Web site lists about 40 participating retailers and taxi companies, mostly in the Boston area.

In February, Vayusa began supporting contactless payments for phones with built-in contactless chips. Other companies are using that approach as well.

Incorporating a payment chip into a phone allows it to be used with contactless card readers like the ones already in use.

JPMorgan Chase & Co. and Visa U.S.A. have been testing such a system in Atlanta since December. Morgan Stanley's Discover Financial Services has also been testing a contactless phone system.

The Japanese mobile phone operator NTT DoCoMo said Tuesday that it would introduce this month a service enabling people to wave their phones over specialized readers to make purchases. The charges will appear on their phone bills.

Gwenn Bezard, a research director at Aite Group LLC of Boston, said there has been "a lot of renewed attention for mobile payments in the U.S. and outside the U.S.," but the only things actually being bought here through phone payments are cell phone software, such as ringtones, and additional time for a phone account.

About 10% of the phone time purchases will be made by phone this year, and that figure will reach 21% by 2010, he said.

For nonphone products and services, "I don't see any model today even starting to make a difference" in payment habits, Mr. Bezard said.

He was particularly critical of Vayusa's idea of using a phone to make purchases at the point of sale, because "there is already something that is working" there - the point-of-sale terminal.

PayPal and OboPay are both flexible enough to be used in places where there is no alternative to cash, he said. "You have to find a niche."

Dan Schatt, a senior analyst for the Boston market research firm Celent LLC, called the three services a "baby step" to a more sophisticated mobile payment system. The use of text messages is growing in the United States, and there is a great opportunity for using them for purchases "in the physical world to get everyday items."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.