Prepare to Lose Your Wallet

The digital wallet is here.

A well-financed Silicon Valley startup is rapidly rolling out a new service designed to consign your old leather wallet to the dustbin of history—along with the typewriter, the telegraph, and the eight-track cassette.

Closely held Obopay, backed by a $48 million venture capital war-chest, is leading the charge to allow people to send and receive money using their cell phones—including those without a bank account or credit card.

While Obopay is not the only company in this business—competitors include PayPal Mobile and several startups—it has gained a jump on the others by signing partnership agreements with Verizon Wireless and Citigroup.

At a time when cell phones are combining music, video and web-browsing functions, it was perhaps inevitable that financial services would become incorporated into mobile handsets. But Obopay's service goes well beyond checking your balance and transferring money between accounts. Now you can actually send and receive money almost instantaneously using your cell phone.

And in two weeks, Portfolio.com has learned, you'll be able to add Obopay to your Facebook, LinkedIn, or MySpace page—and perhaps most intriguingly, to your e-mail signature. The goal, according to the company, is "to turn individuals into merchants."

In an interview Monday with Portfolio.com, Obopay C.E.O. Carol Realini, a veteran tech entrepreneur, said she had retired to Aspen with her husband after taking software startup Chordiant public in 2000. But while on a trip to Africa in 2002, she said she was struck by the ubiquity of cell phones in an otherwise underdeveloped region. It got her thinking.

"If we can use cell phones for communication," Realini remembered thinking, "why can't we use them for banking?"

This insight motivated Realini to come out of retirement in 2005 to start Obopay. Since then, she has assembled a team of tech veterans from places like PayPal and Yahoo and raised $48 million in venture capital over three rounds, from Redpoint Ventures, Qualcomm, and Richmond Global Cellular.

Obopay's service is simple. For 10 cents, anyone with a cell phone can send up to $1,000 per week to anyone else with a cell phone. No bank account or credit card is required, and the company plans to raise the limit.

Potential uses include everything from parents sending money to their children to friends exchanging money to pay for dinner. Realini described one convenience store owner who accepts payments through Obopay with his cell phone strapped to his arm.

To demonstrate the service, Realini sent this reporter $1 over lunch at a busy midtown diner. The transaction took under a minute.

"When I send you money, all I need is your cell phone number," Realini said. She declined to say how many users Obopay currently has or how much money is changing hands at present. She would only say that both figures have exceeded the company's expectations.

In Asia, mobile payment services have been around for some time, Realini said. In Japan, for example, "you can walk into a convenience store or a train station and just wave your phone," she said. Obopay already plans to expand into India, a potentially vast market.

In recent months, Obopay has announced two major partnerships. The first, with cell phone giant Verizon, allows users to download the Obopay software as part of Verizon's Get-It-Now service. Realini said Obopay is currently the only mobile payment service currently partnered with a "tier one" cell phone carrier.

"We used to say that the three things you need when you leave your house are your cell phone, your car keys, and your wallet," Verizon C.E.O. Ivan Seidenberg said in June, announcing the pact. "With the next wave of innovation in converged services, the day isn't far off when all you'll need to take is your cell phone."

The day the Obopay/Verizon tie-up was announced, shares of that old standby Western Union plunged more than 5 percent, wiping out nearly $1 billion in market capitalization.

The second key alliance is with banking leader Citi, which is currently testing a joint Citi/Obopay-branded service in Boston and Chicago. Realini said Philadelphia would be the next, with New York not far behind.

Steven Kietz, who oversees e-commerce and direct banking initiatives at Citi, said the goal is "to meet our customers' needs to access their money the way many increasingly prefer—through their mobile phones—in a fast, convenient, and secure manner."

Realini declined to provide financial details of either partnership.

Next up for Obopay is the launch of the new "Obopay Widget," which will allow users to conduct financial transactions between cell phones and web sites. Irv Henderson, Obopay's vice president for product management, and Ramy Mora, vice president for marketing, said the company will formally roll out the service on August 30.

"The Obopay Widget is a ubiquitous, scalable way to accept money for anything, from anyone, at any time," Mora said, adding that the goal of the widget is "to turn individuals into merchants."

As cell phone convergence moves forward, the traditional leather wallet may indeed go the way of the typewriter, especially for young people.

If it catches on, consumers will have one less thing to keep track of as they rush out the door in the morning. Just don't lose that cell phone.

by Sam Gustin