PayPal unveils mobile payments for in-store shopping

No plans to rely on near-field communication

PayPal has unveiled an in-store mobile payment system that doesn't require near-field communication (NFC) technology inside smartphones.

The system allows shoppers to use smartphones and other mobile devices to scan product bar codes and to authorize payments through PayPal mobile accounts. Another option allows people to use standard credit-card scanning terminals -- but instead of swiping a credit or debit card, the user will initiate a payment by inputting a phone number and PIN on the terminal's keypad.

PayPal President Scott Thompson laid out the basics of the plan in a blog post on Wednesday. In the blog, he also took a swipe at competitors, including Google, MasterCard, Visa and others, who are working on projects to set up so-called mobile wallet systems that rely on NFC-ready smartphones.

"Let's be clear about something -- we're not just shoving a credit card on a phone," Thompson said in his blog.

PayPal is already a major global force in online payments, with 100 million customers. Now the company hopes to handle in-store mobile payments with systems that don't require NFC technology. It also wants to introduce systems that use GPS data to send special offers to shoppers, according to Thompson's blog. PayPal will even allow for customers to set up payments on credit after they've checked out.

Thompson's blog post is accompanied by a video showing the various methods of payment that PayPal will support. Thompson promised to share more details at the X.commerce Innovate Conference Oct. 12-13 in San Francisco.

In the video, a user pays for groceries by inputting a phone number and a PIN on a terminal. In another segment, a shopper uses a smartphone to scan a product's bar code, then uses the phone to pay for the merchandise and walks out of the store, showing a clerk that she used her phone to pay.

Dozens of merchants got a sneak peak of the technology Wednesday at an event PayPal sponsored. The event was covered by The Wall Street Journal's All Things D website, which was not allowed to take photographs but did post a story. In addition to mentioning the payment methods shown in the PayPal video, that story said PayPal will allow customers to continue using plastic cards, issued by PayPal, for payment.

In an interview posted on All Things D, Thompson said the PayPal approach doesn't require merchants to install new terminals, and it doesn't require consumers to buy new smartphones.

While Thompson didn't rule out using NFC technology, he did say "We are not embracing technology" and he argued that an NFC-based payment option that's only available through certain banks and only works with a specific phone on a specific network might only service "50 people out of 350 million people in the U.S."

Starbucks has also expressed concerns about the fact that NFC technology may not be widely available anytime soon. Instead of waiting for NFC, the coffee shop chain has deployed a system that allows customers to make in-store payments by scanning bar codes with their smartphones.

PayPal said in February it would start pilot programs of mobile payment systems within a year, but it hasn't offered more details on timing. The eBay subsidiary faces a number of competitors in the mobile payment market.

All the major credit card companies and many major U.S. banks have announced plans for mobile payment systems. Google said it would work with MasterCard and Sprint on launches later this year, while Visa has announced separate initiatives. Isis, a consortium of three major wireless carriers, has plans for two pilots in 2012.

PayPal and eBay have also filed a lawsuit charging Google with theft of trade secrets related to mobile payment systems and point-of-sale strategies.

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen, or subscribe to Matt's RSS feed. His email address is

Copyright © 2011 IDG Communications, Inc.

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