PayPal Looks for an iPhone 'Bump'

PayPal Inc.'s new iPhone application is more than a payment system — the company is also trying to make it easier for people to use the app as a cash replacement.

The 2.0 version of the eBay Inc. unit's app for the Apple Inc. iPhone allows two users to exchange funds by tapping their phones together. This is the flashiest of the several ways the software now puts the mobile device at the center of the transaction instead of considering it simply a smaller screen to perform the same functions that could be accessed from a computer.

When both PayPal iPhone users fire up the app and select the "bump" payment method, they just enter the details of the transaction and then tap their handsets together to exchange money.

The app's more practical new features include a calculator that can be used to divide a restaurant check among several users and a tool for sending an invoice to several people at once for fundraising. The app also has a mobile alert feature.

Users can also transfer funds from a PayPal account into a linked bank account with a phone.

The earlier version of the app, which PayPal launched in mid-2008 as one of the first products offered through Apple's app store, was not without flair. The amount of money to be transferred was represented graphically on-screen in digital dollars and cents, highlighting the app's goal of functioning as a cash replacement. Otherwise, the app was largely a better-looking way to access mobile services that PayPal introduced in 2006, using text-message commands. (The overhauled version has dropped the animated cash.)

Though "bump" would seem to be a modern feature made possible by mainstream wireless technology, the handheld-to-handheld payment system harks to PayPal's founding in 1998.

One of PayPal's earliest products was a system to let people exchange funds through Palm Inc.'s Palm Pilot devices. Though the devices could communicate wirelessly with one another over infrared, they could not complete the transaction without syncing to an Internet-connected computer — eventually Palm Pilots were eliminated from the process, transforming PayPal into an online payment system.

Osama Bedier, PayPal's vice president of platform and emerging technology, said in a press release that the updated mobile app casts PayPal as the ubiquitous access point for a user's funds.

"With PayPal, the wallet lives in the cloud — the mobile phone is just one device customers can use to access it," he said.

Aaron McPherson, a research manager for payments at IDC Financial Insights, said PayPal should remember these early lessons about using mobile devices.

"They moved away from that for a reason," he said. "There wasn't any money in it … let's get the basics right before we start bumping phones together."

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