PayPal Gets Into NFC Mobile Payment Game

You didn't think PayPal was going to let Google Wallet have the NFC mobile payment market all to itself, did you?

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[Google Wallet: Five things you need to know]

The online payment platform Wednesday debuted a version of its mobile application that uses near field communications (NFC) technology to allow users to pay another through their mobile devices. Here's how it works: Once you log into your PayPal account, you can type the amount of money you wish to send into the application. Then you simply tap your phone against the phone of the person you want to send money to and let the NFC radio work its magic. The phones will make a buzzing sound that will let you know that the payment has been completed, and of course PayPal will send you a confirmation email informing you of the payment.

So far, the PayPal NFC application only works on the Google Nexus S, which so far is the only Android-based device equipped to handle NFC payment applications such as PayPal and Google's own Google Wallet app. Google has said that it plans to run Google Wallet on the Nexus for a trial run before slowly expanding it out to other Android-based mobile devices. When Google starts branching out NFC capabilities to more phones, that will presumably mean the new PayPal app will become available on those devices as well.

The PayPal application differs from Google Wallet in that it only supports phone-to-phone transactions for now. Google Wallet, in contrast, can already be used to buy merchandise from several big-name retailers, including RadioShack, American Eagle Outfitters, Subway, Macy's, Footlocker and Walgreens. Laura Chambers, the senior director at PayPal Mobile, says that the PayPal application's biggest strength is its smooth interface and ease of use that will ensure that customers feel comfortable using their smartphone as a digital wallet.

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"We've said all along that consumer behavior won't change unless we're able to offer an experience that's truly better than what's available today," she wrote on the company's official blog. "We've been looking at NFC technology for a while and we saw a tremendous opportunity to combine the best of NFC and the best of PayPal."

NFC payments have become a hot feature on smartphones ever since Google first enabled NFC technology on its Android operating system when it released its Android 2.3 ("Gingerbread") update last year. NFC technology is designed to send very short-range signals to nearby NFC tags to complete payments, meaning that any store or smartphone user that wants to receive payments directly from PayPal or other NFC payment services will need to have NFC tags embedded into their credit card processors and smartphones.

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