2010 is shaping up to be the year that your iPhone becomes your wallet. Square (from Twitter founder Jack Dorsey) is entering public beta
, and card-swipe giant VeriFone as well as upstart Mophie have products coming out that let you use your iPhone to make credit card transactions. Now, the grtandaddy of all online payment systems, PayPal, has come out with an update to its free app. Taking things to the next level, PayPal 2.0
uses the Bump API to let users exchange cash by bumping phones, just like swapping contact details and Facebook profiles. The absence of a dongle makes this app much more attractive than the competitors, but don't rush to declare this "the end of cash
:" you still have to cough up a fee for every PayPal transaction.
PayPal's new app adds other features - such as tools to help you split restaurant bills, calculate tax and tip and access your payment history. But the Bump integration is the feature that will probably build the most buzz. Bump started as a way for users to exchange contact info
by bumping their phones together, but last year opened their API for other services. When two phones are bumped, they send the information to Bump's servers, which pairs the two phones and manages the data transfer. Both phones need to be running the PayPal app when they bump in order for a transfer to take place: you can't accidentally bump someone on the street.
The coolness factor that made Bump so popular is also likely to give this app wide acceptance. PayPal's name recognition should give people confidence that their transactions are secure, and this would be ideal for small transactions between individuals, where exchanging credit card information just wouldn't make sense. By comparison, Square is a dongle that attaches to the iPhone and allows users to accept credit card payments, and is somewhat off-putting: do I really want somebody to swipe my card on their iPhone?
The downside to either scheme is the cost. Both Square and PayPal add a percentage of of the money that gets transferred as a fee. Square's fee structure is unknown, and while sending money with PayPal is free, you have to pay to use your credit card or to withdraw money you've received. Still, just as we've all become used to paying ATM fees to access our own money, it may become more and more commonplace to pay for the convenience of bumping.