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PayPal teaches Androids to swap cash

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PayPal has unveiled an Android widget that lets you transfer money to a friend or colleague simply by tapping your phone to theirs.

At a conference in San Francisco, California, PayPal senior director of mobile Laura Chambers demonstrated this peer-to-peer payments system using two Samsung Nexus S phones. Samsung's Android-based mobile includes a new-fangled near field communications (NFC) chip.

"With a simple 'buzz' you’ll be able to transact with friends, family, colleagues and employees easier than ever before," Chambers said in a blog post. "Sometimes the most obvious solutions are the most elegant."

You can witness the alleged elegance here:

In short, one person initiates a money exchange via a widget on one Android phone. He then holds his phone against a second Android device belonging to the person he's doing business with, and when the phones vibrate, the second person enters a PIN number to verify the transaction.

At this point, the Nexus S is the only Android phone offering an NFC chip, but other manufacturers have promised to include such chips on future devices. Chambers said that PayPal's widget will be available "later this summer".

In addition to peer-to-peer payments, NFC will let your phone double as credit cards during trips to the mall. Google executive chairman Eric Schmidt predicts that a "third" of all shops will be able to accept NFC payments by the end of 2012. Presumably, he means a third of all shops in the US. Schmidt claims that "fraud rates are so much lower" with NFC, but this seems a ridiculous thing to say when you consider that relatively few actually uses the technology.

NFC does make it more difficult for miscreants to "skim" credit cards numbers, but it's less secure than the chip-and-PIN setup widely used in Europe. ®

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