Funding a better parking meter

August 2, 2012, 2:45 PM UTC

FORTUNE — The crowded mobile payments marketplace is getting, well, more crowded.

On Thursday, QuickPay, a two-year-old San Francisco startup whose app lets people pay for parking at lots in various cities, said it has raised $3.5 million in seed financing and named Barney Pell as its CEO. Pell, a co-founder of QuickPay, is a serial entrepreneur and a co-founder and former CEO of search engine Powerset, which Microsoft (MSFT) acquired in 2008 for $100 million.

QuickPay, which is currently being used in 100 locations in 12 cities in California, Colorado and Nevada, also said it has upgraded its app so it can be used at unattended parking lots that are operated with gates, which make up about 50% of all parking spaces, according to the company. Until now, the service was only available at open lots.

In an interview, Pell said QuickPay hopes to expand beyond payments to provide other services related to parking. “Mobile payments is really a foundation,” Pell said. “Once you get the mobile payments in place, you can talk about how you do reservations, how do you do dynamic pricing, how to do coupons or special offers.”

Pell said QuickPay, which has deals with some leading parking operators in the Bay Area and elsewhere, would seek to expand aggressively. “We want to get all the inventory as fast as we can,” he said.

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QuickPay also hopes to expand its service to parking meters, a market where it would compete with a handful of established players.

Parking is the latest market being targeted by providers of mobile payment services. Some of the most successful companies in the space have focused their mobile payment apps on narrow segments of commerce. Most notably, Starbucks (SBUX), whose app enables mobile payments in the company’s outlets, is believed to have developed one of the most successful mobile payment systems in the United States.

Meanwhile, giants like Google (GOOG) have struggled to gain traction with their mobile wallet applications, which are designed to work at a wide variety of retailers. A joint venture of mobile carriers AT&T (T), T-Mobile and Verizon Wireless (VZ), ISIS, has faced delays and has yet to launch its own wallet app in two test markets, Austin and Salt Lake City.

Others, like Square and PayPal (EBAY), have forged ahead and are slowly growing their base of customers.