The mobile payment service from PayPal has been formally announced and confirmed its launch vendors and ‘Text to Give’ service.

Founded in 1998 and owned by eBay, the PayPal Mobile text message-based service allows consumers in the UK, US and Canada to send money anytime from their mobile telephones.

With the Text to Buy service consumers can buy things instantly, such as CDs, DVDs, shoes and apparel, by sending product codes via text message. Several big name US companies are enabled at launch including 20th Century Fox Home Entertainment, Bravo, MTV, and the NBA Store.

As well as purchasing goods, PayPal Mobile also enables users to Text to Give to charities such as Amnesty International, Starlight Starbright and UNICEF. Using the mobile to donate has so far not been cost effective for charites because the of the large amount of the revenue kept by mobile operators.

PayPal Mobile will potentially be in competition with money transfer services such as Western Union as it can also be used to send money Peer-to-Peer.

“With the overwhelming popularity of mobile phones, the time has never been better for the merging of ecommerce and wireless devices,” said PayPal President Jeff Jordan. “PayPal already has more than 100 million accounts worldwide, and our customers have already entrusted their personal and financial information to PayPal.” In the UK the company claims over 10 million subscribers.

To use PayPal Mobile, customers first activate their telephones by logging into their PayPal account. After registering their mobile telephone numbers, users must choose a secure Personal Identification Number (PIN) which protects every mobile payment.

PayPal Mobile users make payments by sending a text message to PayPal. PayPal calls the user back to confirm the mobile payment, and then sends the money to the recipient. In the case of a Text to Buy purchase, after the merchant receives the payment, the item is shipped to the address already saved in the user’s PayPal account.

PayPal Mobile payments are PIN-protected and backed by PayPal’s fraud prevention system. Each user’s financial information is stored on PayPal’s secure servers, not on the mobile telephone, so even if the telephone is lost or stolen, the user’s PayPal account remains secure.

News that PayPal is conducting internal trials using SMS for P2P payments in the USA, Canada, and the UK has slipped out.

Funds can be transferred from a PayPal account by either sending a text message or calling an automated voice system.

Having first registered and validated the phone with PayPal, to transfer funds users simply send an SMS with the amount and recipient’s phone number to 62226. For example: send 10.50 to 07950001234

Shortly afterwards, the sender is then called back by the PayPal IVR system to review and confirm the payment by entering the PayPal PIN.

A brief note can even be included with a payment text message that will be sent on to the recipient by adding the keyword “note” at the end of the message followed by the message. For example: send 10.99 to 0712345678 note thx for dinn

Text to Buy

As well as for sending money to someone else, the service will also be aimed at businesses wanting to sell products. This approach will have many advantages over reverse billed SMS as not only will the operator not be taking a large slice of the transaction, but both vendor and customer will have a verifiable audit trail for purchases made.

When buying items that need to be delivered, it won’t be necessary for the user to use their phone to type in their address details, with all the potential for error and shortage of space in an SMS. To send the information stored in your PayPal account to the vendor, include “share address”, “share phone”, “share info” and your address or phone number is sent to the recipient.

The vendors that will be available when the service goes live have not been announced yet.

PayPal is not charging to send payments by phone, or to receive payments into a PayPal Personal account. However PayPal Business account holders will be charged the standard rates for receiving payments into the account.

With what are thought to be 10 million user accounts in the UK and 100 million PayPal accounts worldwide, they have the user base to introduce a new dimension into the world of mobile payments.