Mercantile Bank of Michigan, a customer of S1, is the first financial institution to sign up for the new offering and expects to go live with the mobile personal payments service early next year.

"S1's continued innovation in mobile banking and integration with the PayPal network will give us a competitive edge to support a channel that is essential to our customers and strategic to our bank's future," said John Schulte, senior vice president and CIO for Mercantile Bank of Michigan. "We see tremendous value for our customers in expanding our mobile banking functionality to include person to person payments with PayPal."

The S1 and PayPal alliance enables banking customers to quickly send money to PayPal customers from their mobile device by entering the recipient's email address or mobile phone number. In order to complete the transaction, the sender just needs to have a bank account with a participating financial institution and the receiver needs to have a PayPal account.

If the receiver does not have a PayPal account, he or she will be prompted to create one before funds can be transferred into his or her account. There are no other enrollment requirements. The sender will receive a real-time status alert of whether the funds sent have been claimed, effectively providing full insight into the transaction. Financial institutions working with S1 can tailor pricing for this new offering to maximize fee-based opportunities.

"S1 is the first company to announce their intention to utilize the newly-opened PayPal platform to deliver personal payments for banks across the mobile channel," said Dan Schatt, senior director and head of financial innovations, PayPal. "This new relationship creates terrific opportunities for banks to offer valuable, differentiated services to their customers, and is a great example of how collaboration with financial services technology providers like S1 can help fuel a major expansion of ton of the reach and use of mobile personal payments."

"This deal reflects the growing functionality of the mobile channel and is a strong signal to banks of where customer expectations are headed," said Bob Egan, global head of research and chief analyst at TowerGroup, a market research firm based in Needham, MA. "Given the near-ubiquity of mobile devices and fast adoption of smart phones in particular, we can expect an increasing convergence of trusted banking relationships, personal payments and mobile."

Schulte added that instant and easy access to making secure payments on the go has an endless array of uses that offer consumers flexibility in handling day to day needs. "Any spur of the moment need for making a quick payment when you are on the go is a great opportunity to use the mobile channel, and it eliminates the hassle of finding an ATM or dealing with checks. Paying the babysitter, splitting the restaurant tab, getting money to the kids, or collecting funds for a group gift are just a few examples. All the recipient needs is an email address or cell phone number," he said.

"The strategic alliance with PayPal is just one example of S1's commitment to advance its strategy of 'universal money movement,' enabling banking customers to make payments and move money anytime, anywhere and through any channel worldwide," said Jan Kruger, S1 Division President. "By working with PayPal to offer an easy way to pay almost anyone from anywhere through a mobile device, we help banks forge deeper relationships with their customers through an incredibly useful new service."