PayPal launches mobile payment system for small businesses

PayPal’s launched a new mobile payment service aimed at smaller vendors that allows customers to make several different types of payment using their mobile phone.

A lot like Square, it consists of a free app and tiny card reader. Merchants can swipe cards in the reader, scan cards and checks with a phone’s camera or enter card information manually using the app.

To start with, it’s only available for the iPhone, although the company says an Android version’s in the works and should be out next month.

“We’ve heard small businesses loud and clear. They don’t want to miss sales opportunities because they can’t accept the payment type that their customers want to use,” says vice president of mobile David Marcus.

“They want quick access to their money, a reliable card reader, and one transparent, low fee to process these payments. I’m thrilled to launch PayPal Here because we’ve been able to bring all of these key features together into a product that’s so simple to use.”

In terms of costs, PayPal Here  collects a flat rate of 2.7 percent for card swipes and PayPal payments – slightly less than Square. Merchants are given a business debit card for quick access to their funds and one percent cash back on eligible purchases – “which means if you use the debit card, your fees are actually just 1.7 percent!” says Marcus.

As for the users, they get a new version of the PayPal Mobile app that tells them which nearby businesses can use the system – important, as there won’t be many to start with.

Paypal Here is initially only available for a small number of merchants in the US, Canada, Australia and Hong Kong, but will become generally available in those countries over the next month. Other countries will follow ‘soon’.