Hoping to extend its reach to mobile merchants, USA ePay, a payment gateway, this week launched a portable card-acceptance machine that connects to Apple Inc.'s iPhone and iPod Touch products.

Like many of the other products on the market, PaySaber combines hardware (a card reader) and a downloadable software application for the Apple handheld device. The hardware and software support consumer transactions.

Merchants swipe consumers' cards using the machine, called PaySaber. The device encrypts the card data at the time of the swipe, and the PaySaber software sends the information to USA ePay's payment gateway. The software application uses the device's network connection–either AT&T's Edge or 3G networks or the device’s wireless Internet connection, to transmit information to USA ePay’s gateway.

A barcode scanner accessory that works with the PaySaber device enables merchants to scan and manage product barcodes and stock-keeping units, known as SKUs, at the time of purchase, notes Ben Goretsky, USA ePay CEO. After scanning the item, PaySaber calculates the total cost to the consumer.

Merchants may e-mail receipts to customers after capturing a signature using the software application downloaded to the iPhone or iPod Touch. They also can print a receipt onsite using the device, and merchants can capture the signatures on printed transaction slips, says Goretsky.

The mobile-merchant market, which includes such merchants as home-based salespeople and plumbers, is "huge," Goretsky says. "The market is basically untapped, and the potential for sales is extremely huge," he says.

Merchants can download the PaySaber software free from Apple's online application store. Merchants must have a USA ePay payment-gateway account to use the product.

USA ePay bases the price of the device on transaction volume, says Goretsky, who declined to reveal specific numbers.

PaySaber is compatible only with Apple products because USA ePay already has released similar products that work with other smartphones, including Blackberry, Windows Mobile and Android phones, says Goretsky.

"The iPhone is the phone that is No. 1 on the market. Since we already stepped into the BlackBerry, Windows Mobile and Android market, Apple was the next smart step," he says.

Los Angeles-based USA ePay is owned by GorCorp Inc.