In the wake of strong growth in its mobile-payments business, PayPal Inc. on Tuesday made available an upgraded Android app that includes a widget for person-to-person payments using near-field communication (NFC) technology.

The launch represents the San Jose, Calif.-based e-commerce processor’s first live product based on NFC, a short-range communication protocol that has been adopted by PayPal rival Google Inc. as well as the nation’s biggest wireless carriers in a joint venture called Isis. And while the new widget exploits cloud-based payment credentials for users rather than a secure element in the phone, a PayPal spokesman says the product does not indicate how the company might deploy NFC in the future—or even whether it is committed to NFC. “What we’re not doing is betting the farm on any one technology,” he says.

Besides each having an NFC-equipped phone, users of the widget must also each have a PayPal account. Payments are free if funded by the sender’s bank or PayPal account. Fees apply only if the sender funds his transfer with a credit card, the spokesman says.

While PayPal may not be prepared to say its new product shows it is leaning toward cloud-based NFC, some observers argue this is a direction other providers could follow now that PayPal has introduced its widget. “This is a big, big indicator of the future. There will be more [cloud] applications,” says Todd Ablowitz, president of Double Diamond Group LLC, a Centennial, Colo.-based consulting firm. PayPal, meanwhile, is rapidly penetrating the nascent market for mobile transactions. It recently projected it will process $3.5 billion in mobile payments this year, five times the volume it processed in 2010.

Digital Transactions, November 9, 2011
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