In PayPal's Point-of-Sale Push, Middleware Companies a Key Ally

A Canadian software provider is the first of many middleware companies that PayPal Inc. says is key to bringing its online payment system to the physical point of sale.

AJB Software Design Inc. of Mississauga, Ontario is supporting PayPal acceptance in its software, which is used to manage payments at the register and route them to a payment processer. AJB's software is used by 110 U.S. retailers that each has 100 to 5,000 stores.

PayPal, a San Jose unit of eBay Inc., is already moving aggressively to allow consumers to use its payment system in physical stores in place of a bank's credit or debit card. It disclosed last week that it is testing such a system with 20 retailers, including Home Depot, where PayPal is accepted in five stores. (Home Depot is not an AJB client.)

Although PayPal developed a card for its users, its payment system can function without one. In the current trials, users have the option to access their PayPal accounts by typing a phone number and PIN.

AJB started working with PayPal about two months ago, largely due to customer demand. Five of AJB's major customers contacted it over the course of just two weeks, requesting PayPal acceptance at the point of sale, says Pat Polillo, AJB's vice president of sales.

"It wasn't too long after that, that I got a call from somebody at PayPal," he says. "They said: 'Hey, look, we have been out there talking to retailers and a lot of times your name comes up.' "

AJB's first customer to deploy the PayPal add-on will do so by the second quarter, Polillo says. He declined to name the customer.

Retailers still need a separate agreement with PayPal, though AJB's software makes PayPal integration akin to flipping a switch once that agreement is in place.

Besides AJB, "we are going to be signing deals to work with some of these leading middleware companies to connect our systems to their systems to allow merchants to roll this out at stores," says Anuj Nayar, PayPal's director of global communications.

PayPal is also working with terminal makers. It collaborated with VeriFone Systems Inc. last year on a trial of mobile payments at the point of sale. VeriFone also allows users of its mobile card-acceptance device, PayWare Mobile, to transfer funds from a PayPal account by bumping phones together.

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