PayPal enters "dongle" wars, taking on Square

 
SAN FRANCISCO - PayPal, thepayments service owned by eBay Inc, unveiled a newdevice on Thursday that helps small businesses accept credit anddebit cards through mobile devices, entering a fast-growingmarket now led by start-up Square Inc.
 
"PayPal Here" - as the service is called - will provide afree, triangle-shaped card reader and mobile application tosmall merchants.
   
That gadget, sometimes referred to as a dongle, plugs intothe top of mobile devices like Apple Inc iPhones and soon, Google Inc Android smart phones, allow ingmerchants to take payments through these gadgets on the go.
  
PayPal charges a fee of 2.7 percent of the purchase pricefor all types of credit and debit cards - including thoseissued by American Express Co ; transaction fees forprocessing AmEx cards are often higher on other services. Thatcompares with the 2.75 percent charged by Square.
  
PayPal is a dominant online payment processor, but thecompany is trying to expand into the physical world. It has apoint of sale service that it hopes big retailers will use inthousands of stores. Now it is going after much smaller mechantswith the new swipe device.
 
The volume of all types of mobile payments will top $200billion by 2015, up from $16 billion in 2010, according toresearch and advisory firm Aite Group.
 
The market for mobile card acceptance by small businessesand individual merchants is probably about $4 billion currently, but it is growing fast, Rick Oglesby of Aite Group said.
  
Square, started in 2009 by Twitter founder Jack Dorsey,leads this niche of the mobile payments market, according too glesby.
  
Square is known for its own square-shaped card reader thatattaches to the top of iPhones and other mobile devices. It hasbeen a hit among small merchants, such as cab drivers.

The company is now processing more than $4 billion inpayments a year and over 1 million people accept credit cardsthrough its dongle. Visa Inc bought a stake in Square lastyear.
 
Intuit Inc, known for its accounting software,launched a mobile payment service for small businesses calledGoPayment in May 2009 and unveiled a free version in early 2011that came with a free card reading device.
  
GoPayment is about half the size of Square, Oglesbyestimated.  
"About 1.5 million small merchants are using these donglesnow" he said.
  
PayPal has a good chance of grabbing some of the millions ofsmall merchants who still do not accept credit and debit cards,Oglesby added.  
"It's a big market and it's growing very rapidly" he said. "Most providers think there are 17 to 20 million smallbusinesses in the U.S. that are not accepting cards."