PayPal has more than just a digital wallet system for consumers planned. As rumored, today president and CEO John Donahoe has unveiled a small dongle that can be used to accept credit card payments to compete directly with Square, called "PayPal Here." The reader, a large blue triangle that snaps on to the top of an iPhone via the headphone jack, includes a "wing" on a hinge to "stabilize" the reader on the phone when swiping a card.
It uses a new app called "PayPal Here," in which a merchant needs to only punch in an amount. The merchant then hands the phone to the customer, who can tip and sign, and then request the method he or she would like to use for getting a receipt. The app also has a "Scan Card" feature that can use the camera on the iPhone to read the credit card number as well, if the dongle isn't available (the merchant will still need to type in the CVV and Zip code). The scanning feature will also work with checks. The app can be used to accept any credit card, debit card, and also track cash — "any form of payment short of barter."
The app also has a more complex mode that allows small business to track inventory, charge money to clients, and send invoices. It also works with PayPal's local feature on its consumer payment, allowing for direct payment based on location, similar to Square's system. PayPal hopes that the automatic payment system will build loyalty and relationships between small businesses and customers.
The card reader is encrypted, as is the app itself. PayPal is offering both for free, and PayPal will charge a flat rate of 2.7 percent. However, PayPal contends that the free debit card it offers gives 1 percent cash back, making the effective rate 1.7 percent if you use that card. It's launching in the US, Canada, Hong Kong, and Australia today and heading to the rest of the world "soon." A "few thousand" merchants are getting it today, but it won't be shipping to everybody else for a few weeks.