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Haiti Text Donations Shine a Light on Mobile Phone Payments

The large number of consumers reaching for their mobile phones to make a charitable donation to help victims of the earthquake in Haiti may represent a small but meaningful breakthrough in the use of mobile payments.

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“It’s the first time we’ve seen consumers, in a large scale, use SMS to make payments,” said George Tubin, senior research director at TowerGroup.

But while consumers now have an increased awareness of mobile transactions, analysts say a lack of technology and services mean it will be some time before the practice becomes commonplace.

“This event could educate consumers what mobile payment can do and get them familiar with it, so they are more willing to look into that mechanism when the opportunity presents itself in the future," said Sandy Shen, an analyst at Gartner.

Some companies are well ahead of them.

Crisis in Haiti - See Complete Coverage
Crisis in Haiti - See Complete Coverage

Online payment service Paypal, a subsidiary of eBay , allows users to transfer money between users through texts. Obopay has a similar service, and Giiv.com, a startup backed by Google CEO Eric Schmidt, allows its users to send gift cards and other products through text messages.

“They have discovered using texts as a medium of commerce,” said Michelle Crames, founder and CEO of Giiv.com, about consumers who are texting in donations. “The easy, fast and gratifying nature of text is really coming through.”

But whether these companies will see a boost remains to be seen.

A Gartner report last May showed only 3.0 percent of people in North America are expected to conduct mobile payments by 2012.

Limiting major adoption of mobile payments, Tubin says, is that many of the current mobile payment services involve more than using text donations.

In some cases, customers need to first sign up online and then enter a credit card.

The process for text donations, however, is simpler: a code word is sent to a specified phone number and the amount donated is billed to the user's phone bill.

Its ease of use will be a big boost for charities, which are expected to push consumers for text message donations for future, everyday campaigns, say analysts.

As of Jan. 22, the American Red Cross said that it had received $26 million from text message donations alone, about 18 percent of the total funds so far.

“It will become an extension of their fundraising, not a replacement,” says Jim Manis, CEO of the nonprofit Mobile Giving Foundation. “It opens a new channel.”