PayPal announced a peer-to-peer (P2P) near field communications (NFC) solution for Android, designed to support direct payments between Samsung Nexus S owners. Due late this summer, the technology will be followed later this year by an expanded NFC solution that will compete with Google Wallet by supporting retail payments, PayPal says.

As the video and images farther below demonstrate, the PayPal app (pictured at right) enables a Samsung Nexus S user in the U.S. to request or send money directly via a peer-to-peer transaction.

After entering transaction information, the user taps his or her phone up against another phone equipped with the same app and near field communication (NFC) short-range wireless radio. Both Android handsets buzz to establish contact, and the recipient then receives the money by entering a PIN number.

Unlike Google's NFC-based Google Wallet technology rolling out this summer — which involves credit card companies like Citi, MasterCard, and First Data, and is being incorporated in point of sale (PoS) terminals from VeriFone, Hypercom, Ingenico, and VivoTech —  the PayPal technology will initially enable peer-to-peer transfers only. It's unclear whether the NFC technology is an update to PayPal's existing Android payment app, also available for iOS and BlackBerry, or a separate app.

Step 1: A Samsung Nexus S user initiates the PayPal peer-to-peer transaction.

Explained Laura Chambers, Senior Director, PayPal Mobile, in a July 13 blog posting, "We've been looking at NFC technology for a while, and we saw a tremendous opportunity to combine the best of NFC and the best of PayPal."

Step 2: Users then place phones close together until a buzz sounds.

Last month, following the announcement of Google Wallet —  which also initially works only on NFC-enabled Samsung Nexus phones — eBay subsidiary PayPal sued Google over the service for poaching trade secrets. Named in the suit were Osama Bedier, vice president of payments, and Stephanie Tilenius, vice president of commerce. Both held similar positions at PayPal before joining Google.

Step 3: The recipient enters a pin number and receives confirmation of payment.

The PayPal NFC transactions utilize an encrypted token, and unlike Google Wallet do not access the secure element inside the NFC chip, where payment credentials reside, according to a VentureBeat story. The technology is similar to an earlier contactless PayPal payment tool using technology from Bump Technologies, according to a GigaOM report from the Mobile Beat conference where PayPal made its announcement.

GigaOM's Ryan Kim quotes Shimone Samuel, product experience manager for PayPal Mobile, as saying the NFC solution has fewer steps than "bump" payments and can be activated even when only one person has launched his or her widget. NFC also simplifies P2P payments compared to bump payments, said Samuel.

Later this year, PayPal will expand the NFC technology to enable real-world payments to retail and local merchants, according to Kim. "That will be a much bigger deal because it will signal how PayPal will counter moves by Google and its NFC payments initiative, as well as other challengers like Square and the carrier consortium, Isis project," he adds.

Earlier this week, Google acquired loyalty card vendor Punchd, leading to speculation that Google will add Punchd-style loyalty cards to Google Wallet.

PayPal NFC demo on YouTube
Source: PayPal
(Click to play)

---

This article was originally published on LinuxDevices.com and has been donated to the open source community by QuinStreet Inc. Please visit LinuxToday.com for up-to-date news and articles about Linux and open source.