PayPal unveils competitor to Square's credit card reader

The new service, called PayPal Here, is part of the company's gradual move into brick-and-mortar stores and will target small businesses that do not currently have comprehensive payment systems in place, reports The Wall Street Journal.

Since PayPal's inception in 1998, the company's online money transfer service has become the de facto payment solution for many websites, but the eBay subsidiary has been gradually expanding into the physical space.

“What consumers are looking for is the ability to shop anytime, anywhere,” said eBay CEO John Donahoe. He added that with PayPal Here, a merchant needs only a smartphone to accept payments.

The addition of the new triangular credit card reader extends the service and works exactly like Square's offering, which plugs directly into a smartphone's headphone jack. Unlike Square, however, PayPal's reader currently only supports the iPhone, though an iPad-native app as well as Android versions will be available soon.

Along with the card reader, merchants can manually enter a customer's credit card information, scan cards with the iPhone's camera or email a customer an invoice for later payment. In addition, U.S. users will be able to take pictures of personal checks to receive payment.

The service will take a 2.7 percent commission for each credit card swipe or PayPal transaction, while check payments will be free. Interestingly, merchants who scan or manually input credit card information will have to take a 3.5 percent hit plus a 15 cent fee per transaction.

PayPal Here has already rolled out to select merchants in the U.S., Canada, Hong Kong and Australia and should be available to the public within the next few weeks.