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PayPal Just Fired A HUGE Broadside At Square

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As expected, this morning PayPal unveiled a triangular credit-card swiping device called PayPal Here that will let any business or individual take credit card payments.

The device takes direct aim at Square, the startup whose tiny white card reader has become increasingly common at small businesses.

The new PayPal Here reader lets merchants keep more money from transactions than Square, and the associated app takes more kinds of payments, including cash and checks.

Square recently said it now processes more than $11 million worth of payments every day.

Here are some of the features PayPal is touting:

  • The reader, which was designed by Fuseproject, has a little "wing" that flips down over the phone to keep it from swiveling around.
  • The associated iPhone app can also process cash and checks (which can be scanned), and can send electronic invoices.
  • As you'd expect, the device also accepts PayPal payments, and the process is amazingly simple. Users can use a new consumer PayPal app to find a local business that accepts PayPal, and click an option that lets them buy on demand. When the customer walks into the store, the merchant's PayPal app will recognize the person and alert the merchant, letting them give a personal greeting. Then the merchant can complete the transaction without ever requiring the user to do anything -- the amount is simply debited from the buyer's PayPal account.
  • As previously reported, the rate for processing payments is 2.7 percent — lower than Square's 2.75 percent. But also, any small business who signs up will get a PayPal debit card that offers 1 percent cash back, giving them an effective rate of 1.7 percent. So, for instance, if a merchant processes $1,000 worth of PayPal payments, they would get $973 deposited into their PayPal account. But if they use their PayPal debit card to access that account, they'd get an additional $10.

Both the Here reader and the app are free. Right now, it's iPhone only, but an Android version will be available "soon."

eBay CEO John Donohoe boasted that the new reader is better than the competition, and will quickly gain a global footprint because it's backed by PayPal. The company has already been processing online payments from mobile phones since 2006, and half its mobile volume is outside the U.S., Donohoe said.

The iPhone version of the reader will ship to a few thousand merchants starting today, but anybody else can sign up for one by visiting http://www.paypal.com/here.

Here's a close-up of the reader:

And here's what it looks like plugged into an iPhone. That blue triangle on the front prevents it from swiveling around.



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