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New PayPal device scans checks, takes credit cards

SAN FRANCISCO - EBay Inc.’s PayPal division, aiming to get cabdrivers and small merchants to use its payment system, unveiled a new card-swiping device that scans checks and works with all four major credit card networks.

The reader, which plugs into a smartphone, can accept payments from Visa Inc., MasterCard Inc., Discover Financial Services, and American Express Co. cards, PayPal said Thursday at an event in San Francisco. The device also can let retailers get delayed payments by sending out invoices and encrypts account information so credit card data isn’t stored on phones.

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The product helps PayPal extend its foothold in e-commerce transactions into the brick-and-mortar world by making it easier for merchants to use its technology. The company will give away the thumb-size card reader, called PayPal Here, and provide the accompanying smartphone app for free. EBay then makes money by charging a rate of 2.7 percent on transactions.

“This is about getting ubiquitous acceptance of PayPal and bringing small retailers into the fold,’’ Gil Luria, an analyst at Wedbush Securities Inc. in Los Angeles, said Wednesday.

PayPal Here will compete with a product from Square Inc., a San Francisco startup begun by Twitter Inc. co-founder Jack Dorsey. Its reader, which also accepts all major credit cards, charges a slightly higher rate - 2.75 percent.

PayPal first gained popularity as a way for small e-commerce sites to accept payment without the expense or hassle of processing credit cards. The new device will help PayPal compete in the market for mobile payments, which may top $170 billion in transactions by 2015, up from about $60 billion last year, according to Juniper Research.

In addition to Square, Intuit Inc. and VeriFone Systems Inc. also offer devices that let consumers pay with credit cards over their mobile phones.

To create the card reader, PayPal worked with Fuseproject, a San Francisco-based design firm founded by Yves Behar, people familiar with the situation said. Fuseproject also designed the Jawbone line of Bluetooth headsets and low-cost computers for One Laptop per Child.

PayPal is going after a larger network of companies, big and small. That includes rolling out its payment service to in-store terminals at Home Depot Inc. locations.

The company is talking to the top 200 US retailers and has persuaded a “significant’’ number in that group to sign contracts to accept PayPal in their stores, former president Scott Thompson said in December - before he left to become chief executive of Yahoo Inc.

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