Paypal enters mobile payments -

PayPal has entered the mobile payments area by producing a new device that helps businesses accept credit and debit cards via mobile devices.

The company has bought a start up called Square and will run a service called PayPal Here in the United States, Canada, Australia and Hong Kong.

Small business merchants in those countries can sign up and get a free, triangle-shaped card reader and mobile gizmo that plugs into mobile phones.

At the moment it only works on iPhones but an Android version is on the way which will allow merchants to take payments through the gadgets on the go.

The "Square" approach is slightly different from other mobile payment models. PayPal told Reuters that customer card information will be encrypted by the triangular card reader before transactions are sent to the PayPal app on the mobile device. This stops customer data from being lost or stolen.

PayPal's merchants can sign up for a PayPal debit card, go to an ATM, and withdraw money accumulated from sales.

It sounds good for Paypal and not so hot for the retailers. It appears to cream off 2.75 percent from Square, which is a little cheaper than a credit card for the retailer. But if the retailer wants to take money out from their PayPal account they have to pay again.