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PayPal calls it a “very small test.” But what the eBay Inc. payments unit learns from the Near Field Communication initiative in Sweden could help with the company’s overall mobile-payments strategy to seek point-of-sale technologies that complement its cloud-based digital wallet.

Every mobile-payment development represents a new possibility, and PayPal is open to all ideas as it expands its online payment processing to digital wallets and in-store mobile payments, PayPal spokesperson Anuj Nayar tells PaymentsSource. The test in Sweden is taking place during the two weeks before Christmas.

Because the PayPal digital wallet is cloud-based, meaning processing and data storage takes place in a secure Web-based system, NFC technology could prove to be an effective method for initiating offline payments, Nayar suggests.

Industry analyst Todd Ablowitz, president of Centennial, Colo.-based Double Diamond Group, LLC, tells PaymentsSource that PayPal takes a different approach to NFC because of its desire to keep the digital wallet in a cloud-based system.

“PayPal would love it if NFC was used just so the consumer could tap his phone to say he was at the terminal, but the entire payment process took place in the cloud,” Ablowitz suggests.

From PayPal’s vantage point, all it really needs from NFC is to connect the presence of a person to a physical point-of-sale location, he adds.

Payments Source, December 22, 2011