Online payment company PayPal said on Wednesday it was preparing to
offer a service for consumers to make purchases or money transfers
using simple text messaging via mobile phones.

The move by
PayPal, a unit of online auctioneer eBay Inc., marks a big step in
bridging the worlds of e-commerce and the physical world of brick and
mortar stores by giving consumers a pay as you go option via phones,
analysts said.

The service, known as PayPal Mobile, will be
launched in the next couple of weeks in the United States, Canada and
Britain. Other markets worldwide will follow for the world’s biggest
online payments service.

"PayPal is going to be launching a mobile payments product," PayPal spokeswoman Sara Bettencourt told Reuters.

Word
of the service had leaked out earlier on Wednesday when bloggers found
links to test pages on PayPal’s Web site describing it. Details can be
found at:
(https://www.paypal.com/cgi-bin/webscr?cmd=xpt/mobile/MobileSend-outside).
Over time, the company may look to extend the service to the more than
55 countries and regions where PayPal is registered to transfer funds
online, Bettencourt said. However, she stressed that PayPal has no
specific plans to do so yet.

While designed to make online
payments more convenient for the nearly 100 million existing PayPal
users, the move to offer a mobile payment service holds out the
prospect of reaching vast markets in the developing world where phones,
rather than computers, are the main way to connect to the Internet.

The image “http://images.businessweek.com/mz/04/45/techbuy/images/razr_phone.jpg” cannot be displayed, because it contains errors.PayPal
Mobile will offer customers two options for transferring funds, be it
for gifts or purchases, by phone to nearly anyone they choose, whether
individuals or retailers.

Payments can be sent over a phone via
text message or by calling an automated customer service system and
using voice commands to transmit funds, according to PayPal’s site.

"This
is very important because it is going to create an awareness that your
mobile phone is much more than just a device for talk," said Dan
Schatt, an analyst with financial consulting firm Celent. "It allows
you to make transactions."

In effect, the phone has become an electronic wallet.

In the United States, start-up TextPayMe now offers a PayPal-like
service that allows consumers to send send payments via text messages.
Obopay is set to launch mobile payments with a companion debit card for
purchases or cash withdrawls.

Operators of mobile phone systems
in Britain, Europe, Australia, Japan and many other parts of Asia are
well ahead in investing in mobile payment services. But PayPal’s
stringent verification system gives it a leg up on independent services
as it appeals to a huge base of existing users, Schatt said.

PAY AS YOU GO

One
feature, called Text to Buy, would allow magazine readers, for example,
to buy advertised items such as clothes, concert tickets or music or
movie-video discs using their mobile phones, by sending product codes
located in the ads.

A merchant receiving such a payment would then ship the product to the address stored in the PayPal user’s account.

"It’s
basically just another way to access PayPal," Bettencourt said. "It’s
just like in the online world when you send a payment," she said. "All
you are doing is sending a payment using your phone instead of your
computer."The image “http://mobiles.wildpalm.co.uk/images/siemens-mc60.jpg” cannot be displayed, because it contains errors.

When introduced, mobile phone users will be able to
send a text message to 729725 (the spelling of PayPal on a numeric
handset keypad) with the amount of money the sender wishes to transfer
and the recipient’s phone number. On the PayPal Web site, the company
uses the example: "Send 5 to 4150001234".

A PayPal computer then
calls back the text message sender on the phone and asks the user to
enter a secret PIN to confirm the transaction. PayPal immediately
notifies the recipient and tells it how to claim the payment online.

The
Web site shows a second option where the customer calls 1-800-4PAYPAL,
enters a secret PIN, the amount of the transfer and the phone number
where the payment is to be sent.

By Eric Auchard
Reuters.com