PayPal Pairs Samsung Nexus S, Android Widget for Mobile Payments

PayPal challenges Google Wallet with the Android widget and the "Gingerbread"-based Samsung Nexus smartphones to enable person-to-person mobile payments.

PayPal showed its plans for mobile payments by using two Samsung Nexus S phones to let users exchange money, a solution the company promised will be released later this summer.

The eBay (NASDAQ:EBAY) payments unit has written an Android widget that lets people pay and get paid by tapping together two Samsung Nexus S phones running Google's Android 2.3 "Gingerbread" operating system. This is done via NFC (near field communication) wireless technology, which Gingerbread and the Nexus S support.

PayPal's mobile payment plan comes to light more than a month after Google (NASDAQ:GOOG) unveiled its Google Wallet mobile payment service.

Wallet, set to launch in New York and San Francisco, lets Samsung Nexus S 4G users make mobile payments by tapping and paying for goods from their phones at select retailers that use NFC-enabled sales terminals.

Laura Chambers, senior director for PayPal Mobile, showed off how PayPal mobile payments work with a colleague in this video.

Users who wish to make payments or send a request for money may tap the Android widget on the Nexus S. Two users tap their Nexus S handsets together long enough for the phones to buzz, generally a few seconds. When the person who is being solicited for payment punches in their pin, the money is transferred.

This Android and NFC-based solution is just a start, according to Chambers, who said this "is just one of the many ways we're using different technologies, on different devices, to change the way people pay and get paid."

The solution comes just weeks after Chambers declared PayPal is logging up to $10 million in mobile payments a day and now projects $3 billion in mobile-payment transactions for the year.

"Mobile payments are growing at a rate we never could have imagined when we started processing them back in 2006," Chambers said. "We first predicted $1.5 billion in 2011 mobile-payments volume. At our analyst day in February, we upped that to $2 billion, and just a few months later, we have now added another billion to that number."

Google Executive Chairman Eric Schmidt said he expects that a third of checkout terminals in retail stores and restaurants will be upgraded to allow NFC mobile payments from mobile phones within the next year.

However, NFC payments the way Google and PayPal intend them to work are hamstrung by the lack of broad NFC availability.

Currently, only the Samsung Nexus S and 4G handsets support the technology, severely limiting the potential for mass distribution of mobile payments. Moreover, it isn't clear consumers will trust substituting their wallets for phones.

Google and PayPal have more than a competitive tie on NFC-based mobile payments. PayPal is currently suing Google's Wallet product managers Osama Bedir and Stephanie Tilenius for allegedly stealing trade secrets from when they worked at PayPal and using them to fashion Wallet for Google.