Mobile Money: Using Your Cell Phone to Transfer Funds

Back in 1871, if you wanted to transfer money from one person to another, you used Western Union's telegraph (the original text messaging service). Today, you just touch your cell phone. New P2P mobile applications and plain old text messages eliminate the need to travel to a physical location to move cash.

Key Takeaways

  • Almost all banks have a dedicated app to transfer funds for their clients.
  • Due to fingerprint and face-recognition technology, transferring money on your phone has never been safer.
  • There are many different apps to transfer money, and which one you use will be based mainly on the type of transaction you'll be making.
  • Although using text-based transfers may seem easy, it doesn't carry the same level of security as apps that require biometric confirmation.

Lots of Options

You may already be one of the hundred-million-plus people worldwide with a PayPal account. The company allows you to transfer money via text domestically and overseas for free unless you use a debit or credit card to send the cash.

Competitors have entered the market offering a wide variety of transfer options. Some are free but require both sender and receiver to have an account. Venmo is a popular choice and charges no fees on certain transactions and setups, but is geographically restricted.

Banks like Wilmington and Trust Bank of America have morphed traditional services to be mobile compatible, but the ultimate mobile payment service is the e-wallet. And let's not forget the advent of Apple Pay, Google Pay, Samsung Pay, and others.

Companies like Mobile Giving Foundation provide electronic donation services to charitable organizations like the Red Cross. You can even set up monthly payments. Fundraising becomes as easy as "text REDCROSS to 90999 and make a $10 donation to American Red Cross Disaster Relief."

The donations are aggregated from cell phone carriers and forwarded to the Red Cross. The company charges a setup fee and earns a transaction fee for each donation plus commissions based on the amount of the donations.

Is It Safe?

Mobile payments are regulated. Money Services Businesses (MSBs) must be licensed in the state(s) where they do business and must comply with suspicious activity reporting and money laundering regulations enforced by the Financial Crimes Enforcement Network of the Treasury Department.

Just like any other business, there are potential scammers, so individuals must take care to know who they are texting.

The evolution of mobile technology is also making mobile payments more secure. Newer smartphone apps facilitate direct connection and authentication of payers and recipients. They use technology security companies to create trusted sites and applications accessible to mobile users.

How Does It Work?

Widely accepted communications protocols allow mobile phones to communicate with each other. By embedding keywords into text messages sent to specific numbers, cell phones can transmit commands that tell the wireless provider to add a given amount of money to the user's bill. When the bill is paid, the phone company transfers the amount designated to the recipient.

Some carriers may charge a fee for sending the text message according to the user's existing phone plan. Traditional banks allow access to accounts through mobile applications without using the wireless carrier as an intermediary.

To send or receive money to a friend:

  1. Register with a money transfer service by setting up an account and making a deposit.
  2. Use the provided short text commands to text cash to your friend's phone number or account ID.
  3. Receive funds by requesting and accepting payments via text message.

To make a donation to a charity:

  1. Text the given keyword to the number provided. No need to have any accounts with money transfer services.
  2. You will receive a confirmation text message.
  3. Pay your phone bill, which will include the amount you donated.
  4. Your wireless company will send your donation to the charity.

Worldwide Acceptance

The U.S. is just catching on to text payments. It may not be a surprise that Europe and Asia were early adopters, but mobile payments have had their biggest impact in areas where other payment systems are scarce. In Kenya, the popular M-PESA system of text payments is widely accepted as a form of money transfer for everything from groceries to school tuition to electric bills.

The global mobile payment market size is expected to grow to over $12 trillion by 2027. It was $1.48 trillion in 2019.

Since 2007, more than 49 million active customers have used M-Pesa to conduct over 15 billion transactions. Over 918,500 active agents allow customers to open accounts and use the system to buy goods and services for a small transaction fee. The country has experienced increased commerce as a result.

The Bottom Line

Using your cell phone to transfer funds and make payments has become an efficient and common form of payment in the last few years. It is a safe and secure method, and with most phones requiring facial or fingerprint recognition for access, it has become more secure than carrying around a physical credit card.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Cision PR Newswire. "Global Mobile Payment Market Size Projected to Reach $12.06 Trillion by 2027."

  2. Vodafone. "What Is M-PESA?"

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