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PayPal Here expands to Europe ahead of mobile payment rival Square

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PayPal is extending its PayPal Here mobile payment processing platform to Europe, beating rival Square in the race to establish a beachhead on the other side of the Atlantic.

PayPal Here, introduced in the U.S., Canada, Australia and Hong Kong last spring, enables small businesses and other users to process credit and debit transactions by swiping cards through a triangle-shaped dongle that attaches to their smartphone or tablet. PayPal is overhauling the Here hardware for its international rollout: Instead of a dongle, the European version employs a separate scanning device--roughly the same size as a calculator, complete with keypad--that connects via Bluetooth to the merchant's iPhone or Android smartphone and accepts so-called Chip and PIN debit and credit cards (as opposed to the swipe cards that dominate the U.S. market).  

"There's no contract or on-going fees, just the initial competitive purchase price and a small fee for each transaction. (We'll announce actual pricing a little closer to the launch)," said PayPal Vice President of Global Product Hill Ferguson. "Just like its original counterpart in the U.S. and other countries, it allows you to send invoices and receipts wherever you do business, as well as taking card and of course PayPal payments." Ferguson adds PayPal plans to launch Here services in the U.K. this summer, with other European countries to follow.

"The U.K. is the logical place to start as it is PayPal's second biggest market outside of the U.S. with some 18 million active users," said Ovum Principal Analyst Eden Zoller. "PayPal has taken pains over the PayPal Chip and PIN device, which was designed and built in the U.K. and over a year in the making. But it will come with a price tag and this will need to be competitive given the solution is meant for small businesses. PayPal says this will be the case--it is not looking to make money from the device itself."

PayPal Here charges U.S. merchants a flat rate of 2.7 percent per transaction, a .05 percent savings over rival Square's mobile payment offering. Square expanded to the Canadian market last year, but the company has not yet indicated plans to roll out overseas--offering service in Europe would require Square to adapt its own hardware to accommodate Chip and PIN processing as well.

Although PayPal Here is entering the European market ahead of its biggest U.S. competitor, it must still do battle with native European m-payment services including iZettle, Payleven and mPowa. Zoller is optimistic about Here's chances, stating "PayPal has an advantage in being an established, trusted payment provider with a high-profile global brand."     

In addition to PayPal Here, eBay-owned PayPal is teaming with retail chains including Home Depot, Abercrombie & Fitch, American Eagle Outfitters, JCPenney, Foot Locker, Office Depot and Toys "R" Us to trial mobile wallet services across more than 18,000 physical U.S. stores. PayPal is expected to handle around $20 billion in mobile transactions this year.

For more:
- read this PayPal Blog entry
- read this Reuters article

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