PayPal Here allows UK traders to take credit card payments on their smartphones

PayPal Here

Mobile payments system from PayPal arrives in Europe ahead of rival Square

PayPal Here is arriving in the UK this summer, letting small businesses take card payments via a mobile device.

PayPal Here arrived in the US for swipe cards last year, but will arrive in Europe this year with support for Chip and PIN systems.

The system uses a small handheld device that allows merchants to accept credit and debit cards, connecting to a new PayPal app that merchants can run on iPhones and Android smartphones.

"You pair the device with your Android phone or iPhone to accept secure payments anytime, anywhere you trade, whether at a market stall, shop, restaurants, taxi or even in your customer’s home," PayPal explained.

PayPal said it will launch the service in the UK this summer, but plans to release it in other European countries later.

PayPal has been slow to move into the market in the US, following the lead of Square, headed by Twitter co-founder Jack Dorsey, which attracted thousands of small merchants in recent years by offering a free card reader that attaches to smartphones and handles payments for a flat 2.75% fee. However, Square has yet to launch in the UK or the rest of Europe.

The European version of PayPal Here comes with a different device, designed from scratch by the company's UK team, because of the more complex Chip and PIN system. The approach in the US, which relies on older magnetic stripes on cards, is considered simpler and potentially less secure.

"Trying to figure out how to make Chip and PIN to work in these devices has been hard," said Rick Oglesby, a payments industry expert at Aite Group. "The gadgets so far have been fairly expensive and big and clunky."

While there's no contract or on-going fee for the service, there will be a "nominal" one-off fee for the hardware and a small charge for each transaction. The commission is 2.75% in the US.

"For Chip and PIN devices, it's not realistic to bring the cost down to zero," Oglesby said. "That tends to temper the demand a little bit. But it also weeds out really small merchants and individuals who won't use it as much."

UK businesses that are interested in PayPal Here can sign up on the website.

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