PayPal has launched PayPal Here, its mobile payments solution for small businesses. PayPal Here is a combination of a triangular card reader that connects to a smartphone via its headphone socket, plus an app that the merchant uses to process payments. It’s iPhone only initially, but an Android version is due in around a month’s time.

PayPal Here is PayPal’s response to services such as Square and Intuit, and of course to NFC-based mobile wallet services such as Google Wallet and Quick Tap, the Orange/Barclaycard UK initiative. It enables consumers to pay via card, PayPal, cash, and, in the US only, via cheque. It is available now for “select merchants” in the US, Canada, Australia and Hong Kong. It will open to all other merchants in those countries next month, with more countries to follow.

PayPal takes a 2.7 per cent cut of the total transaction value for card swipes and PayPal payments. Merchants are also given a business debit card for quick access to their funds, and 1 per cent cash back on eligible purchases, effectively bringing the commission payment to PayPal down to 1.7 per cent.

“The arrival of ‘PayPal Here’ makes the alarm bell of POS terminal vendors ring once again,” says Mario Fernandez, research analyst at Frost & Sullivan. “The volume of transactions over mobile devices is set to grow rapidly. PayPal and Square have already a solid foothold in the mobile payments space that threatens POS vendors. No monthly fees, a free card reader and free a mobile app are strong selling points for SMEs versus the traditional approach of POS vendors with comparatively high costs for the POS hardware.

“The product launch makes a warning for NFC supporters as well. NFC has taken too much time to take off, however other solutions, like the one from PayPal, appears as an attractive alternative to mobile contactless payments.”