American Express is investing in a startup called Payfone that makes mobile payment technology that uses a person's mobile phone number to authorize payments to merchants based on funds from a user's credit card or debit account.
The Payfone payment system doesn't use contactless Near Field Communication (NFC) technology, although the company does have an open system that someday could accommodate NFC, Payfone CEO Rodger Desai said via email. "Payfone's system is architected to be open and able to embrace all payment and billing standards, such as NFC," Desai said.
NFC is gaining attention as a key technology for use in mobile payment systems. In some systems undergoing trials in the U.S., users who have smartphones equipped with NFC chips can make payments by waving their phones near NFC reader terminals. Such payments could be charged directly to a user's bank account or processed by a wireless carrier. Several NFC-based payment models are emerging in the U.S., promoted by various credit card companies, phone manufacturers and wireless service providers.
Payfone said AmEx is the largest investor in a new $19 million round of funding for the company, which was co-founded by Desai in 2008. AmEx didn't provide details on how it expects to use the Payfone technology, except to say in a statement that Payfone will be used to "evolve" AmEx's new digital payment system, called Serve, which allows a user to bill purchases to nearly any bank-issued credit card or prepaid card.
AmEx expects Serve to attract younger users who want to make payments on their phones and other digital devices rather than by swiping a credit or debit card.
In a statement, Payfone said Verizon Communications and BlackBerry maker Research In Motion, through their investment arms, are also investing in the company.
Online shoppers can currently use Payfone's payment checkout system, which relies on the user's mobile phone number, Desai explained. Payfone uses an existing carrier signaling network known as SS7 to transmit payment data securely, Desai added.
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