PayPal launches mobile payment system

A PayPal employee holds an iPhone with a PayPal Here card reader attached, in San Francisco, Calif., March 15, 2012. PayPal Here, the service is similar to existing mobile payments services such as Square. Customers will be able to pay using credit cards, their PayPal accounts or, in the U.S., checks. But they won't need a PayPal account to do so. (AP Photo/PayPal, Kim White)

March 15, 2012 2:31:52 PM PDT
San Jose-based PayPal launched a new mobile payment system it hopes will streamline transactions for consumers and create more sales for merchants.

"PayPal Here" is aimed at small businesses, such as Kara's Cupcakes where buying a red velvet cupcake is often an impulse purchase. Under the new PayPal service, a merchant uses a plug-in card reader for the iPhone (and Android smartphones in the near future) to swipe the customer's credit or debit card. The shopper then signs and indicates whether the receipt should be emailed or texted, or no receipt is necessary.

PayPal executives unveiled the new service at a media event at Ghirardelli Square in San Francisco Thursday morning. PayPal Here is launching in the U.S., Canada, Hong Kong and Australia. More countries will be added later. A few thousand merchants will start receiving the plug-in card reader in the next few days.

Kara Lind, owner of Kara's Cupcakes at Ghirardelli Square and in San Francisco's Marina District, was one of the first to try the new system. She told ABC7 News how fast and easy it is. It will drive more sales, she believes, while speeding up a purchase for consumers.

However, PayPal is not the first to launch such a payment system. Square is already doing the same thing, although PayPal appears to have more features. Intuit also has a mobile payment system.

Merchants will pay a 2.7 percent transaction fee for each purchase, but they will get a 1 percent rebate applied to a special PayPal debit card.

Smartphone users will need to download a special PayPal application. It lets them know which merchants around them accept PayPal Here. Through the app, the customer can let the merchant know he or she is there, or on the way, and items can be pre-ordered. When the customer is ready to pay, the process just awaits a signature.

PayPal says it has 100 million users, and it hopes its 14 years of experience with payment systems will give it credibility and wide-spread adoption. Consumers now have a choice.