PayPal Takes On Square with ‘PayPal Here’

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Harry McCracken /

PayPal's David Marcus shows off PayPal here

Square, the tiny credit-card reader for smartphones and tablets, is the most interesting thing to happen to payments in a long time. Among the people who think it’s interesting are the executives at payment behemoth PayPal. And at a press event this morning in San Francisco, the eBay-owned company unveiled its own mobile-payments gizmo and accompanying apps and services: PayPal Here.

PayPal VP of Mobile David Marcus never mentioned Square by name and called the new product a game-changer, but let’s face it: PayPal Here is playing Square’s game. It’s just trying to play it better than Square does.

The reader itself, like Square, plugs into a phone or tablet’s headphone jack. Created by the industrial-design gods at Fuseproject, it’s a triangle with a fold-down wing that’s designed to brace the reader so it doesn’t tumble off. It encrypts the card data before transmitting it to the mobile device; Square’s original reader was notoriously unencrypted, but the company started shipping an encrypted version last month.

Compared to Square, PayPal Here has a bunch more features. If you don’t have your reader, you can snap a photo of a card to accept it. It tracks cash and check payments as well as cards, and has a feature for issuing invoices. PayPal charges a slightly lower transaction fee — a flat 2.7% vs. Square’s 2.75% — and plays up its debit card, with a 1% cashback feature that reduces the effective fee to 1.7%.

At the event, the company also touted its live-person customer support and plans to roll out Here internationally, though it’ll only be available to “select merchants” in the U.S., Canada, Australia and Hong Kong at first.

The unveiling also included a demo of the new version of PayPal’s mobile app, with a digital-wallet feature that’s very, very similar to Square’s Card Case app. (Both let you leave your phone in your pocket, and show the merchant a list of names of nearby customers who are using the app.)

I like competition, so I’m glad to see PayPal taking on Square with all it’s got. That’s not a pro-PayPal sentiment: I assume that this development will help Square up its game and that merchants and consumers, one way or another, will benefit.

It’s an intriguing face off: a gigantic, utility-like payment-processing company with 100 million customers against a scrappy, inventive startup. (Intuit’s GoPayment is another contender.) I’ll be curious to see if PayPal’s sheer scale and resources will erase Square’s head start. May the best service win — and may they all get better with time.