For example, to send $15.27 to a friend with mobile number (206) 555-1234, you would text “PAY 15.27 2065551234″ to SMS@TextPayMe.com.

The service is currently free, and they are giving every new user $5 to sign up (this really reminds me of the early days with paypal, where they also gave $5 for every new signup and you could beam payments between Palm Pilots).

Your TextPayMe account can be tied to your bank account for moving money into and out of the virtual account. You can also give TextPayMe your credit card for “overdraft” payments.

It looks like they will eventually charge for transactions, but the service is free for now.

Before everyone gets too excited about TextPayMe, note that PayPal is launching something similar, called “PayPal Mobile”.

What would be ideal is if this was picked up by the cell phone service providers, and payments were simply credited or debited from your phone bill. I’d also like to see something like this partnered with BillMonk.

To test the service, sign up for an account and sms $5 to my cell phone.