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June 19, 2000

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New Services Let Users Pay Bills Via Cell Phone

Analysts say instant payments through mobile devices are the wave of the future

By Cheryl Rosen

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isa International Inc. and MasterCard International Inc. should be keeping an eye on X.com Corp. If the startup has its way, consumers will flock to its new service, which lets them instantly send money over cell phones that support the Wireless Application Protocol to settle accounts with businesses and individuals. X.com, in turn, will need to look over its shoulder at First Data Corp. and its Western Union subsidiary, which plan to launch a similar service by July.

Consumers who enroll in X.com's PayPal service deposit money by check, electronic funds transfer, or credit-card transfer in accounts maintained by X.com. Consumers can send bill payments simply by punching the X button on their mobile phones and then typing in the recipient's E-mail address. Merchants that enroll in X.com's Business Account program must wait about a day for payments to clear via cell-phone transactions.

One of the attractions of PayPal for businesses is that X.com charges no monthly fee and only a 1.9% fee on each transaction. That's lower than most conventional credit cards, which charge an average monthly rate of 2.9% plus 30 cents per transaction. In its first day on the market, 1,400 online merchants signed on, says X.com founder and CEO Elon Musk. In the next few months, X.com will introduce a debit card as a companion to the service.

"Instant payments through cell phones and other mobile devices are the wave of the future for payment systems," says Avivah Litan, Gartner Group's research director for financial systems and payment services. "PayPal is the first to get there."

But competition is growing quickly. Western Union, arguably the best-known name in electronic funds transfers, will debut MoneyZap in July. The service initially will be available on wireless devices, with a debit card planned for later in the year. First Data provides credit-card processing for 95,000 Web merchants.

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