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PayPal and its New Credit Card Reader

PayPal and its New Credit Card Reader

PayPal announced last week that it was now allowing merchants to use their mobile phones as payment processors in a small, but powerful way. With a small triangle sized plastic piece that connects to a smartphone, these dongles are all the rage and many have patiently been waiting on PayPal’s latest must-have. But did PayPal jump the gun?

PayPal Here

This new PayPal service, “PayPal Here,” comes with full encryption built into the small, thumb sized triangle card reader and a free app. so that merchants can actually process the payments. As part of our research, we visited the PayPal site to explore PayPal Here; unfortunately, we learned that it’s not yet available, but instead, the company has a “be the first to get it when it’s here” button.

It might be on its way, but it flies against the name of PayPal Here. The company said that it was being made available to “select merchants” in Hong Kong, Canada, Australia and the U.S. Still, though, we found a lot more to be excited about. It allows any iPhone or Android smartphone to become a fully functional credit card payment station and you can also invoice customers.

It’s all about the further empowering today’s contemporary merchant.

Other Benefits

If a merchant doesn’t already have his own PayPal debit card, it’s included with the package. It earns 1% cash back on purchases and accessing cash via ATMS is easy, too. PayPal will also add a business to the PayPal mobile app page, which is accessed millions of times each year by shopping consumers.

PayPal also provides its merchants with a number of communication methods, including around the clock live operator assistance. Another great feature is the immediate availability of funds. Once a merchant completes a sale, the money shows up instantly in that merchants PayPal account for transferring to their bank accounts or withdrawing as cash.

Consumers will receive an instant electronic receipt by both text messaging and email (if the consumer has either), instant funds settlement, multiple items with one checkout, monthly statements that are to have business owners sitting right with the accountants and the ability to calculate tax rates and accept discounts or coupons. In short, it offers everything for a seller who’s not bound by a traditional brick and mortar business dynamic.

Finally, for those consumers who might not have with them their dongle, there are other options. For PayPal payments, customers can use PayPal’s consumer mobile app. If they would rather pay with a credit card, the merchants can then manually key in or scan their credit card information for automatic input, or email them an invoice which they can click to pay straight from their mobile phones. For those merchants who have mobile check capture accessibility, they can then scan their customer’s check and the funds will automatically transfer into the merchant’s PayPal account.

The Anticipation

PayPal reported impressive fourth quarter earnings and says its business consumers are part of the reason. In 2011, its volume increased by a whopping 25% to just less than $35 billion for the year. PayPal is owned by Ebay. Needless to say, the potential exists for further growth, courtesy of this new technology.

Currently, PayPal’s biggest competitor in this area is Square, which is already being used in extraordinary ways, including as a processor for at least two of the presidential candidates. Both Mitt Romney and President Obama have already incorporated Square into their fundraising efforts.

The biggest challenge for PayPal, Square and any other new apps will be putting to rest concerns by consumers. Ensuring safety is top priority and for some it may feel like too much of a risk. That said, there have been no successful efforts of hacking Square and with PayPal so well known for its security efforts, it’s difficult to believe a hacker could successfully pull off this type of crime with any success.

Of course, any of the major credit cards are accepted on the PayPal Here mobile app. The following weeks, and certainly once the dongles become wide available, will tell the tale whether or not this was a strong move for PayPal. If Square’s success is any indication, this new payment option could mean significant differences in the way we use our credit cards and debit cards.

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