When a group of people dine out together, someone always lacks cash. They forgot to go to the ATM, but they'll pay you back ASAP. Right.
Funny, though, how people rarely forget their cell phones. Philip Yuen put these two observations together and came up with TextPayMe to let people send money using text messaging.
TextPayMe seems like a logical second act for PayPal, but Yuen sees the services as complimentary.
"We just want to take over the world in all face-to-face transactions," he said.
TextPayMe doesn't have much competition in the United States so far, but PayPal may be hot on its heels. Ironically, PayPal began as a service for beaming money between PDAs. While people can now use PayPal through web-enabled cell phones, the company doesn't have an SMS function.
But a recent Craigslist job posting for a business manager for "PayPal Mobile," described as "a dynamic, young 'start-up' business unit within PayPal dedicated to bringing value-added mobile payment services to consumers and merchants," has launched rumors that such an offering may be forthcoming.
"We haven't made any announcements in the mobile payments world," the PayPal spokesperson said.
Yuen, a former Microsoft program manager, teamed up with his Lockheed systems analyst brother, Gerald, and another Microsoft employee, CJ Huang, to get TextPayMe rolling. The trio secured funding from startup seed company Y Combinator and launched the TextPayMe beta in mid-December.
TextPayMe works much like PayPal -- users create an online account and link it to a credit card or bank account. They can use SMS to send up to $500 a month. The service is now free, but the company might eventually charge fees for certain transactions, Yuen said. Beta adopters might have permanent free use, he said.
Combining text messaging and payment sounds like a pretty good idea when you consider 203 million people in the United States use cell phones, according to the CTIA, and 96 million people use PayPal.
Russ Jones, a payment industry consultant with Glenbrook Partners, said the move toward using cell phones for payment is inevitable.
He noticed, however, that TextPayMe's user agreement explicitly gives the company permission to pull users' credit report. That might scare some people away. That's a deterrent TextPayMe doesn't need with PayPal potentially nipping at its heels. So far, about 900 people are signed up and about a third have completed transactions, he said.
Mark Toews, a technical recruiter in Seattle, said he signed up for TextPayMe about a month ago, but only used it once because his friends won't sign up. They're not willing to give up bank information to a new company. Toews hopes TextPayMe will become more popular.
"I think it's a great service," he said, "it just needs more time to mature and more people to get signed up with it before it will really blossom."