In a move that could be seen as a precursor to mobile in-store payments using so-called cloud-based near-field communication (NFC), PayPal Inc. is testing an app that works with contactless stickers to allow consumers to access their PayPal accounts.

The test, which is taking place at two stores in Stockholm, Sweden, is set to run for only a few days, concluding before Christmas. The app was developed by Stockholm-based technology firm Accumulate AB and works on both Apple Inc.’s iPhone and handsets running Google Inc.’s Android software. The stickers are read by point-of-sale terminals deployed by Point Transaction Systems AB, also of Stockholm. Point is being acquired by VeriFone Systems Inc. in a $784 million deal announced last month. Accumulate and Point approached PayPal with the idea of conducting the pilot, according to a PayPal spokesperson.

As with the P2P widget, all personal financial data for the Stockholm tests are managed on PayPal servers, in what is known as a “cloud-based” arrangement, rather than on the user’s handset. With most NFC ventures announced so far, the data are stored inside the phone in a so-called secure element, which is an embedded chip or the phone’s SIM card. “It’s another attempt by PayPal to connect the person to the cloud,” says Todd Ablowitz, president of Double Diamond Group, a consultancy based in Centennial, Colo. “It’s PayPal’s vision of how they want NFC to work.”

Sticker-based NFC can have limited practicality, though. Ablowitz points out that even if sticker costs drop to the price of a mag-strip card, the costs of distribution can be high. “Distributing stickers is very expensive and logistically challenging,” he notes, making it difficult to scale beyond pilots.

Digital Transactions, December 20, 2011
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