Mobile payment startup Obopay said Wednesday it received $10 million in funding to turn U.S. cell phones into wallets.

The Palo Alto, California-based company said the financing was its first VC money and came from Redpoint Ventures, Onset Ventures, and Richmond Capital.

Using a cell phone as a credit card, or “m-wallet,” isn’t as new as it sounds. In advanced cellular markets like Japan, consumers commonly swipe cell phones to enter subways or buy drinks at vending machines.

But in the U.S., a widely-adopted system for mobile payments has so far not become popular, despite hype in the late ’90s.

A lack of third-generation cellular services and problems with interoperability have hampered mobile payment plans in the U.S., and Obopay faces a number of competitors.

“From hot dog vendors on the corner to massive purchases at Barneys, the system will be ubiquitous,” said Peter Kellner, founder and managing director of New York-based Richmond Capital.

The sentiment could be seen as a little premature, given the company has no product on the market and will not comment on any deals with wireless carriers—the gatekeepers for the industry.

Mr. Kellner said more details about products and partnerships would be announced in the second quarter of this year.

Though Mr. Kellner would not explain how the service would work, he said the technology would go beyond using text messages stating, “the company developed that in the first week.”

Startups like Black Lab Mobile and Scanby are already running services in the U.S., though neither has made much headway on the U.S. carrier front.

Black Lab Mobile uses a text-message system, with the ideology that that is the dominant mode of data communication for U.S. phone users.

Scanby uses a camera phone to take pictures of barcodes to purchase items.


Using a cell phone as a wallet could be a natural way to converge the credit card and the cell phone in the digital age.

The information contained in a credit card, could easily be incorporated into a cell phone. But in the U.S., the market depends on whether consumers, businesses, and carriers are interested.

In developing markets where consumers depend on cell phones for an Internet connection more than PCs, small businesses are already starting to rely on cell phone payment services.

But different technologies will likely become dominant in different markets, and many issues like security still make carriers and consumers wary about moving too fast.