It's now beam me a loan, Scotty

 

With a flourish, the waiter in the chic little bistro presents the bill for the pricey lunch you've just had with your lawyer. At the same time, you begin the ruse of apologetically searching your pockets for the wallet you've deliberately left back in the office so that she'll offer to pick up the tab.

But then, she spots the Palm Pilot in your jacket. "Ah!" she says cheerfully as she produces her own Palm. "Just beam me your share of that £280."

Misers beware: that scenario should be a reality by September, when Palo Alto, California software start-up Confinity (www.confinity.com) launches PayPal, an application that will allow individuals to "beam" sums of money between hand-held devices such as mobile phones, Palm Pilots, and pagers.

Confinity hopes that people will find PayPal indispensable for modest payments between individuals - say, when a colleague is out of cash when you're splitting the bill after a meal, or to divide expenses on holiday.

According to Mr Peter Thiel, Confinity's CEO, "All these devices will become one day just like your wallet." And, he adds, "Every one of your friends will become like a virtual, mini ATM."

In Mr Thiel's case, though, it's a pretty fat wallet. Last Friday at the launch of PayPal - held, appropriately enough, in a restaurant - the venture capital arm of phone manufacturer Nokia, Silicon Valley-based Nokia Ventures, beamed its full $3 million (€2.82 million) investment in Confinity into Thiel's Palm Pilot. The whole process took about five seconds. "It's actually faster than cash," says Mr Thiel.

He says using the application is easy. Users go to the PayPal site to register, where they also leave a credit card number. After downloading the small application, users choose a PIN. Sending a payment involves keying in the amount and pointing the device at another device; the transfer is made via the infrared port. The device figures out who the recipient and sender are; the next time the sender logs on to PayPal's site the payment is processed.

And if the recipient lacks the PayPal application, the sender can beam that over, too. That, says Mr Thiel, is actually part of the business plan for spreading the application widely.

Confinity is hoping to jumpstart the US market for personal digital transactions. To date, Americans have been reluctant to use online electronic wallet programs or microchip-embedded smart cards, although the latter are popular in much of Europe. Confinity's two main investors, Nokia and Deutsche Bank, are perhaps an indication of European support for the concept.

Mr Thiel says he is confident PayPal will succeed because, unlike wallets and smart cards, the program allows individuals to make payments to each other, not just to retailers or financial institutions. "Most transactions take place between people in the real world, away from the desktop," he says.

The money involved in the transactions will be handled by Merrill Lynch in an escrow account; the interest earned by the account will go to Confinity. "Part of our business model is to capture the float," says Mr Thiel.

He believes the simplicity of the system will appeal to individuals. "It's very different from the massive infrastructure of the smart card model that's being pushed in Europe." But he agrees that the European market initially may be a more readily accepting market for device transactions because it is already comfortable with smart cards.

Concerns about security have also hampered the growth of digital transactions, but Mr Thiel says PayPal has the work of two "world class cryptologists" behind it. Stanford University professors and cryptologists Dan Boneh and Martin Hellman helped develop the application. Mr Hellman, one of the inventors of public key cryptography, is also an investor.

Because PayPal uses strong encryption, Confinity is obliged to apply for an export license from the US government to offer the program outside the US, but hopes it can make PayPal available in Europe and elsewhere as close to the US launch as possible.

Mr Thiel thinks PayPal could revolutionise the way people view money, and create new opportunity in emerging economies, where banking systems can be corrupt or unstable, because people with an Internet-enabled device will be able to hold money in outside stable currencies.