Mobile pay changes the way we do biz

A man uses his cell phone for mobile banking.

TEXT OF STORY

Kai Ryssdal: Here's a little travel tip for those who might never have had the chance to get up here: Summertime in Aspen? Even better than winter. Not as cold and way, way easier to appreciate the amazing great outdoors. A lot of what's happening in Aspen this week, though, is inside at the Ideas Festival. There's been a whole series of panels on digital life and the new economy. How living in a world of ones and zeros is changing how we live. Everything from how we get our news and information to how much money we carry in our pockets.

Janet Babin explains how mobile pay programs via social media like Twitter or through your cell phone is changing the way we do business.


Janet Babin: Will Stofega knows the mobile technology space pretty well. It's his job as an analyst at IDC to cover tech trends. But even he was not prepared for all the cell phones he saw on recent trip to India.

Will Stofega: They've chosen to purchase mobile phones before they even have basic plumbing services. Guys living in a hut somewhere without any running water, or anything, you think "Oh my god," but then you see he has a Nokia device, or a Samsung device.

And Stofega says people are coming up with innovative ways to use those devices: Farmers can check their cell phones to find a nearby market that'll fetch the highest price for their crops. Some employees get paychecks by cell phone.

In a twist on the typical flow of technology, these mobile phone innovations have made their way from developing countries to the U.S., instead of the other way around.

Take the mobile payment service Obopay. The idea for the Redwood City, Calif., firm actually came from Africa, where many people have cell phones, but relatively few have bank accounts. That's true in many parts of the world, says Obopay's marketing chief David Schwartz.

David Schwartz: There's now four billion people in the world who have a cell phone. But there's only about a billion and a half people who have a bank account today or any access to financial services.

So in developing countries, Obopay acts like a mobile bank -- you can transfer money from a prepaid account through a cell phone. In the U.S., Obopay links your phone to your bank account through a PIN number.

Lots of new ways to move money around are emerging that take some control away from banks and credit card companies. There's "Checkout by Amazon" and "Google Checkout," that offer e-commerce retailers alternative ways to get paid. Devices from start-ups like Square let anyone with a smartphone take a credit card payment. A company called Twitpay links your Twitter account to your Paypal account.

And Will Stofega with IDC says there's another elephant in the mobile pay room:

Stofega: We know from patent filings that Apple is really very very interested in using its assets to enable mobile payments.

As in bypassing your credit card to purchase directly from the iTunes store. All these new payment methods could chip away at the system banks and credit card companies have in place. Mobile pay could level the playing field for smaller merchants. The fees levied on businesses to accept credit card transactions can be expensive. Typical mobile pay services usually cost about half what the credit card companies charge per transaction.

Obopay's David Schwartz says since the economic downturn, many of the company's new customers are smaller mom-and-pop operations.

David Schwartz: People are using the service for things like running their day cares, piano teachers or tutors being able to get access to funds right away.

A study out this week from the Pew Internet and American Life Project found that as of May of this year, 11 percent of cell phone owners said they'd purchased a product using their phone. This was the first year the Pew survey even asked people about buying stuff with their mobile phones.

But there are some challenges to mobile pay. Michael Gartenberg with The Altimeter Group says the security risk of handling these new money transactions can be enormous.

Michael Gartenberg: It's harder than it looks, because there has to be an awful lot of trust going on in a lot of different places -- trust from the consumer side, the banking side, trust in terms of security and privacy that make this stuff work.

So, even though it's getting closer, the day of the fully digital wallet could still be years off.

I'm Janet Babin for Marketplace.

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