Beam Money by E-mail? Confinity Is Banking on It
Although some industry observers say the system is cumbersome, Confinity believes that WAP-enabled phone users will provide a large market.
By Catherine Applefeld Olson
How It Works
Virtual Checking Account
Skepticism
They say money makes the world go ‘round. But can money travel round the world with the click of a mouse or the touch of a button on a wireless device?
Thanks to Palo Alto, CA-based Confinity, the answer is "yes," sort of.
The company just launched an electronic service called PayPal, which enables consumers to "beam" money via e-mail to anyone in the United States. Plans to tackle Europe are on tap for late 2000.
Currently the service is available for PCs, PDQ cellular phones, and Palm portable devices. But David Sacks, Confinity vice president of strategy, said PayPal is poised to bust open in the mobile market when WAP phones make their debut in the States next year. A version for 2.8 GHz pagers is also in the works.
"Right now no one has a WAP phone in America, but supposedly there will be 100 million shipping next year, which is huge potential compared with the 5 million Palm devices in the market today," Sacks said. "If the WAP phone takes off like we think it will, that will be our big market; that's what we envision."
How It Works (Back to Top)
PayPal users register basic information such as name and address at the company Web site. When a user wants to send money, he enters either his credit card number or bank account and PIN, and the money is either charged to the appropriate account or wired from the bank to his PayPal account. There is no service charge, and customers have no minimum balance requirements.
Recipients get an e-mail message letting them know the money is available. They then register with PayPal and can either request a check to be mailed to them, or have the money be wired to their account via a third-party automated clearinghouse. The beauty of the system is that the sender never needs to know the recipient's bank account information. But it's also the reason the money does not instantaneously land in the recipient's account. If you're counting on PayPal money, you've got to wait out the mail delivery time or the few days it takes for a wire transfer.
No matter, Sacks said. He said the service is geared toward consumer-to-consumer transactions—splitting a bill at lunch, for example—or business-to-consumer micropayments, both cases where the recipient generally does not give out bank information or have convenient access to a money wire service. On Dec. 16, PayPal will launch a partner program to woo affiliates to use its service rather than send rebate checks, etc., to consumers themselves.
Virtual Checking Account (Back to Top)
The other plus is that, unlike other more traditional money transfer services, Confinity does not charge its customers a cent.
"We plan to earn money off the float from the money in the PayPal system," Sacks says. "We think it will become convenient for people to have an electronic wallet at PayPal, and they might keep a couple hundred dollars in their accounts, like a checking account."
PayPal offers several layers of security. To authenticate user accountability, the company snail-mails to the real-world address provided by the user a password necessary to unlock a given account. It also employs encryption developed by Matin Hellman, who invented public key
crytography and sits on the Confinity board of advisers.
Skepticism (Back to Top)
Although it seems PayPal has gone to lengths to dot its I's and cross its T's, its third-party model doesn't wash with all industry observers.
"They're dreaming," said Iain Gillott, vice president of worldwide consumer and small business telecom at IDC/Link. "If you get a WAP phone to buy something, you're going to use a credit card or charge it to your phone. [PayPal] is introducing a third party that doesn't need to be there, and an unknown, unbranded, third party at that.
"It just seems cumbersome to me," Gillott adds. "If you are at lunch and splitting a bill, you just take out your credit card or a $20 bill."
About the Author
Catherine Applefeld Olson is a free-lance writer based in Alexandria, VA.