PayPal unveiled a new payment system that lets Android owners pay each other by tapping their phones together, signaling the growing prominence of NFC-enabled devices in online commerce.
The payment system currently only works on one phone model, the Samsung Nexus S,, offered by Sprint and T-Mobile. But it will expand to other Android phones with NFC functionality in the future, according to PayPal.
The new phone-tapping app is much like the technology PayPal used in its "Bump" app, which allowed users to send money back and forth by bumping their phones together. This system is different, and may be indicative of how PayPal plans to expand NFC use in its growing mobile commerce business.
PayPal plans to unveil its real-world payment system later this year. Many people already use the service as an online banking system, even using PayPal-issued debit cards to make payments from their accounts. Adding NFC technology to their shopping habits may shift PayPal users to more frequently choose the online payment service for their purchases, especially as mobile payments gain traction with consumers.
The San Jose, Calif.-based company said it originally estimated a reach of $1.3 billion in mobile payments this year, but recently doubled that promotion, as more smartphone owners begin to use mobile platforms for their purchases.
PayPal faces an incredible amount of competition in the mobile commerce field, however. Google's E-wallet service already partnered with MasterCard and Citigroup to make credit card-free payments possible, and the Internet giant is testing the service at retailers in New York and Los Angeles.
PayPal has an advantage over Google's E-Wallet since it lets people to make direct cash payments to each other -- a convenience its customers may well applaud. With a sizable customer base already using the service, PayPal may be able to leverage its existing infrastructure to become the service of choice as the field of competitors grows.
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