This is such good news. After reading Russ’ post about PayPal Mobile finally being out, I checked out the FAQ.

I have to say, I was afraid for a while that monthly bills from carriers would start looking like credit card bills. If the premium SMS model started dominating all commerce with or through mobile devices, this seemed inevitable.

The good news is that PayPal did it better and sooner. They have your info already – so now they can use it. Shipping address – check. Different funding sources like credit cards and checking accounts – check. You can still buy that CD on your United Plus Airline Miles Card and not get a separate bill from your carrier.

The security is there too. You’re getting a manual phone call where you have to type in your PIN – you do not send it through SMS so it’s not floating around in plaintext. No worries if you lose your phone either.

So is the next step RFID or QR codes interfacing with this? That will cut out the texting part and speed things up a bit. But what about the manual phone call? If PayPal does the credit card fraud monitoring thing, they could lose it in favor of a charge protect plan where they look for suspicious activity. That requires a bit more infrastructure, but if it gets big enough I’m sure they’d attempt it. Another way to go is a client application. Use it to scan the QR and it prompts for your PIN. Both are then securely sent over as a purchase.

Is this a viable source for publishers to charge for mobile applications? That’s a solid “maybe”. If the service gets popular and it can be assumed that most people have PayPal with the mobile features activated, then sure. But until then, Premium SMS is still the most straightforward way to charge the user. If the carriers want to keep up this lead however, they’re going to have to put a backend billing system in place for it like PayPal, and not just have it pop up on your phone statement.

Well done PayPal.

Update: Carlo at Mobhappy is taking the opposite viewpoint. He thinks the complexity of setting up that additional PayPal layer will be the main thing that hinders adoption.

I can’t say I disagree. But I’m coming from the angle that people know PayPal because of EBay. The people who will use this service will need to be at least EBay savvy to do it – maybe already having a PayPal account. I think that’s the gray area. They have a userbase through EBay. The question is the intersection of that set with people who will use mobile payments. Will that intersection be a critical mass to get this off the ground? I don’t know. But I’m certainly not going to dismiss the chance.

His last statement, though:

The breakthrough this market is waiting for isn’t PayPal — sorry, folks — at least not in this incantation. It’s still a touchless IC platform that supports both physical and online purchases. What’s holding back mobile payments currently, for the most part, is that operator revenue share. But that’s not a technical issue or even a societal one, just a flawed business model. PayPal’s real impact in mobile, rather than its actual product, may be to force that onerous revenue share down to more acceptable levels. But any mobile payment system can’t ignore mobile content, and that’s where the biggest opportunity is. But it’s also the one place where a system will butt heads with operators — so you have to wonder if PayPal’s avoided it intentionally.

… is dead on. If PayPal only serves to force the carriers to be less demanding in revenue share, they’ve made a lot of progress.