Clairmail lets you bank via SMS

(Updated with more info on security functions)

ClairMail, a Novato, Calif. start-up, allows customers to transact business through SMS or email from their mobile phones. It has raised $12 million in second round of funding.

A number of companies, including 4Info and Google, let users use text messaging to get information — such as movie listings, sports scores and weather. However, they don’t support transactions with banks. Only ClairMail has built out the secure infrastructure to do that, says its chief executive Joseph Salesky.

The funding was led by JAFCO Ventures. Existing investors Norwest Venture Partners and Outlook Ventures also participated.

Clairmail lets customers do their banking via SMS, including transferring funds, verifying account and transaction information. A customer messages the bank from their phone, and the bank confirms the customers identity by texting back to the phone and opening up a channel for a transaction.

What if someone loses their phone, and another person takes it and tries to text the person’s bank account and remove cash?

Salesky said that is unlikely to happen, because cell phones are usually the first thing people realize is missing, and all they have to do is call to their carrier, and have it switched off — and that a thief is unlikely to know how to text a bank, and which bank to text. (Update: Moreover, when someone transfers funds, Clairmail pushes them a WAP link or calls them to prompt for a PIN, to provide additional security. Neither the WAP link nor the PIN are stored in the phone.)

The company was founded two years ago. Previously, Salesky was at Oracle for several years, and then founded Pixion, which he said invented web conferencing, and another company, Skytron.

The idea for the company came after he realized how the phone bill is the biggest expense in his home, but that its messaging capability is archaic. Why not use email and texting as an accessing technology, he decided.

The company has several customers, including one that spends over $1 million a year, he said, declining to disclose the customer names.

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