Start-up wants to turn your phone into a wallet

Sharif Alexandre walked from his house Thursday afternoon while talking on a cell phone and holding his keys, but without his wallet. He wasn't trying to make a point - he laughed at his lapse, and quickly returned to his Fitler Square rowhouse.

But Alexandre, 37, laughed at the irony, too. His slip illustrated one of the ideas behind Xipwire, his fledgling technology venture: that people of a certain age don't go anywhere without their phones.

Xipwire is a system that allows its clients to make payments via text messages to businesses that also sign up for the service. It launched quietly in January, and so far has only a few hundred clients. But it is hoping to draw attention - and sign up more users - at this weekend's Rittenhouse Row Spring Festival, which it is cosponsoring.

Alexandre and his partner, Sibyl Lindsay, have a goal that can only be called audacious: turning U.S. cell phones into ubiquitous mobile-payment devices. It's an aim in which America lags many other countries - and a business space already busy with competitors.

Some, such as a service called Square, use smartphones to enable merchants to accept credit card payments without a landline phone. Others, such as an iPhone app developed by PayPal, focus on payments between individuals via their phones.

Xipwire's goal is to be more than a niche service. Alexandre's dream is for Xipwire, which he developed himself, to compete alongside Visa and MasterCard as an alternative payment system.

Analysts treat such goals skeptically, especially when voiced by start-ups without major funding. And for now, Xipwire is basically a bootstrap operation, employing just two people full time and self-funded with more than $200,000 by Alexandre.

"This is a cutting-edge idea," said Jeff Kagan, an Atlanta telecommunications analyst. But he added that it was "one of a million interesting ideas that pop up in the marketplace all the time. Most don't make it."

Alexandre and Lindsay hope to break through improbably with a strategy that Kagan said was more common in high-tech meccas such as Seattle and San Jose, Calif.: a small-scale launch aimed at proving that a technology and business model are viable.

"We decided to take six months to go get a bunch of users and go get a bunch of merchants and make sure we have a functional system," Alexandre said. He said he had recently begun talking to angel investors and venture capital firms, the traditional boosters for start-ups.

Alexandre has an engineering degree from Penn and 15 years of experience in the IT field. He is seeking patents on Xipwire's technology and says the business concept rests on two basic insights.

One is that younger people are inseparable from their phones - more likely to remember them than even a wallet or purse when they venture out. The other is that while high-tech smartphones get more attention, ordinary text messaging is accessible to nearly everybody.

Xipwire works simply, once both consumer and merchant have set up online accounts.

The consumer's account is supplied by withdrawals taken in $20 increments from a funding source - ideally a checking account, but Xipwire also links to a debit or credit card. The merchant needs a specially adapted Apple iPod Touch, to connect to the Internet. Transactions then take place entirely by text message.

At a restaurant, a customer provides a Xipwire ID and receives a text saying that the restaurant wants to charge, say, $100. All such texts come from 56624, a "short code" Xipwire has obtained from every major carrier.

To accept, the consumer then replies with a four-digit PIN code. The "receipt" comes in two forms: a confirmation text and an e-mail.

So far, Xipwire works at only a dozen merchants and restaurants, mostly in the Rittenhouse area. To lure more, the company has waived fees until 2011. After that, costs will be split: consumers will pay 10 cents per transaction, and merchants a 1 percent fee.

Alexandre said the idea was to be "significantly cheaper than credit cards" to businesses, which typically pay 2 percent to 3 percent per transaction. Consumers, he believes, will gladly pay for the convenience.

Xipwire's plans call for signing up "tens of thousands" of consumers by Jan. 1. But for now, Alexandre concedes that big success in high-tech is a long shot for anyone.

"You always have your dream of starting your own thing," he said.