The convenience of PayPal’s new payment system promises advantages for firms and consumers

Online payment specialist and eBay subsidiary PayPal will next month launch a new service to allow consumers to make purchases or authorise money transfers using mobile phone text messages, according to reports from Reuters.

The service, which will debut in the US, UK and Canada, is to be branded PayPal Mobile and will offer both online and bricks-and-mortar businesses a new payment channel for customers.

According to reports, registered PayPal users will be able to text PayPal with the amount of money they wish to transfer and the phone number of the recipient. PayPal will then call the user to authorise the transaction with a PIN before notifying the other party of how to claim the payment online.

A spokeswoman said the initiative simply extends PayPal's current services so that users can authorise money transfers from their mobile as well as from a computer.

However, a new Text to Buy feature that allows product codes to be included on advertisements may also appeal to firms, as it would help them maximize returns from marketing campaigns by letting customers buy products using their mobile as soon as they see them in an advert.

With up to 100 million existing PayPal users likely to be targeted, the new service also represents a significant salvo in the intensifying arms race between mobile operators, banks and payment firms to deliver alternatives to cash and card payment systems.

Experts say mobile phone or even biometric-based payment methods could reduce fraud and be more convenient for consumers.