Pay as you text? mPay hopes to make cell phones the new credit cards

You and several friends go out to dinner. The check comes. You glance at each other, cringe and start the unsavory task of breaking twenties and gathering the correct amounts of cash.

Now, imagine taking out your cell phone and directly wiring the money to the restaurant, no credit cards or cash necessary. By next fall, according to Adjunct Professor of Computer Science Donald Stanford, that situation could be a reality.

Ocean State Partners, a startup company run in part by Stanford, is looking to introduce mPay – a free system that allows customers to use their cell phones like debit cards – to campus in time for the fall semester.

“We are slowly moving toward a cashless society,” Stanford said, “where cash is kind of the exception, instead of the rule.”

Stanford, a former chief technology officer and senior vice president for the GTECH gaming and lottery corporation, formed Ocean State Partners with three other former GTECH executives and a business consultant for the Rhode Island Economic Development Corporation.

With mPay, a customer can send money instantly to anyone else with an mPay account – a friend, a business, a taxi driver or even a vending machine. The service requires no extra software or text messaging and works on any cell phone – even, Stanford said, a seven-year-old phone he bought on eBay.

Money can be transferred directly from a checking account into an mPay account. From there, it can be sent to others by entering a PIN and the recipient’s merchant number on a cell phone and pressing “send,” then entering the desired amount to send. The recipient instantly gets a text message displaying the amount transferred to their mPay account.

The transfer occurs in four seconds, according to Stanford, faster than a credit card is processed. No credit card machines are necessary, so merchants can be mobile – imagine, Stanford said, being able to pay a flea market vendor without cash. Stanford said he thinks merchants will be receptive to mPay because they would pay less commission than with credit cards, and mPay would reduce the amount of cash they carry on-hand.

“Cash is actually very costly to merchants,” Stanford said, citing the risk of theft. The mPay service would be ideal for smaller merchants such as taxi drivers, who are particularly vulnerable to robbery.

Stanford stressed the security of the system. No information is stored on the cell phone, so no one else can access the money if the phone is lost or stolen. “Credit cards are very insecure,” Stanford said. “Anyone can pick up a credit card and start signing. It happens every day.”

The mPay system is intended to work as an intermediary between sender and recipient, eliminating the risk of hackers stealing account numbers. “Digital phones are very hard to crack,” Stanford said. “And even if they cracked it, they still don’t see your financial information.”

Ocean State Partners plans to offer mPay to Rhode Island college students before opening the service up to all of Rhode Island. The company is currently negotiating with Brown, the Rhode Island School of Design, and Johnson and Wales and Bryant universities. Eventually, the plan is to make mPay national.

Stanford said Ocean State Partners has begun talking to local merchants and chain businesses such as CVS and Starbucks, as well as the Brown Bookstore and Brown’s eateries. They plan to conduct a limited trial this spring and launch the full-scale student service in the fall.

“I would definitely try it,” Karen Tenner ’10 said of the mPay service.

Several students expressed concern about bad cell phone reception, but many seemed enthusiastic. “It sounds like something that is going to become widespread,” said Johanna Jetton ’10.

“Sounds too easy to spend money,” joked Kara Segal ’10.

After a year of negotiations, Stanford’s company bought the U.S. rights to the mPay software, which was originally developed by the Polish company mPay International and is now fully instituted in Poland.

Ocean State Partners has partnered with Transol, which dominates the market for pre-paid phone cards in Guatemala. Because Transol has connections to Guatemalan phone companies and banks, Stanford foresees mPay spreading easily to the Guatemalan marketplace.

“We believe that the opportunity for mobile payments, if done properly, is huge,” Stanford said. “Everyone has their cell phones with them all the time.”