While parts of Europe and Asia routinely use mobile devices for e-commerce, such activity has been minimal in the United States. But that may change soon. Yesterday, PayPal, a subsidiary of eBay (NASDAQ:EBAY), announced its PayPal Mobile service.
Suppose I'm at a garage sale and want to buy a copy of Benjamin Graham's Security Analysis. On my cell phone, I can text message PayPal or call 1-800-4PAYPAL. I specify the amount for the purchase, the recipient's phone number, and confirm my PIN number (for security purposes). PayPal then notifies the seller, and it's a done deal.
PayPal also offers a "Text to Buy" service. If you see an ad, online or offline, that has the "Text to Buy" message, you can use your PayPal Mobile account to make a purchase.
PayPal is not charging buyers extra for these new services; the merchant pays a transaction fee.
This could turn into a viral product. Early adopters should see it as a novelty; after all, wouldn't it be fun to buy a meal using your phone? But as more person-to-person transactions occur, new users will enter the system (and bring even more new users with them).
True, there may be some resistance due to security concerns and the potential for abuse. But the strength of the PayPal and eBay brands has proved most of these concerns negligible.
Most importantly, PayPal has the advantage of a 100-million-user base, and deep experience in handling enormous numbers of small transactions. It also helps that PayPal is the first major Internet company to launch such a product. Given eBay's expertise in marketing and prowess with gaining a critical mass, expect PayPal Mobile to get a huge amount of buzz - and, most likely, a boost in subscriber numbers in due time. This type of innovation should increase the stickiness of the overall eBay experience, which will continue to make eBay investors very happy.
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Fool contributor Tom Taulli does not own shares mentioned in this article.
