Within the next two weeks, PayPal said in a post on the PayPal Blog, every Home Depot in the U.S. will be equipped to accept payments from customers using a PayPal card or mobile phone number and PIN combination.

Yesterday, at Mobile World Congress in Barcelona, PayPal also said it was increasing its efforts in the area of carrier payments, calling for wireless carriers to “revise standards to help optimize user experience, increase flexibility of carrier payments as a payment method, and increase payout rates for merchants.” The statement comes after Boku — which directly competes with PayPal’s recently acquired Zong — introduced a white-label service for in-store payments with wireless feature phones and smartphones, through a partnership with MasterCard.

In recent weeks, PayPal’s in-store payments system at Home Depot stores has come under fire from Visa, which is working on its own digital wallet service, called V.me. Visa’s global head of product, Jim McCarthy, said that PayPal’s system poses security risks, and that thieves could potentially see a paying customer’s account number as they enter it in at a payment terminal.

PayPal responded by reiterating its commitment to innovating point-of-sale purchasing, and said users’ data is more secure in PayPal’s cloud than it is in their pockets.

The experiment, should it become a reality, would involve a special Square-built payment terminal on tablets in the back of 50 taxicabs to start, as well as a Square application that would process riders’ credit card payments. And the swap-out — and the stakes — would go beyond just hardware.

If tablets running Square were to supplant some of the existing technology in the back of New York City cabs — currently supplied by Creative Mobile Technologies LLC and VeriFone Systems Inc., one of the world’s largest electronic payment companies — fee structure and revenue from “Taxi TV” content would also come into question. (It’s important to note that the New York TLC hasn’t formally submitted the Square proposal to its board of commissioners yet; it plans to do so on March 1.)

Of the 13,237 official taxicabs currently on the road in New York City, VeriFone processes the credit card payments in approximately half of them; CMT handles the other half. The two companies were awarded the contracts in the summer of 2007, after the Commission had put out a challenge seeking innovative tech and electronic data tracking for taxicabs; by November 2008, the technology had been fully implemented in all cabs.

The systems currently use cellular data to power the transactions, which is also technically possible through an iPad or another type of tablet device. In addition to the payments technology, current systems provide automated dispatch capabilities, GPS, computerized trip logging and text messaging — also functions that a tablet could likely provide.

So hardware aside, consider the content on the Taxi TV’s. Those loops of news updates, late-night talk show clips and dining guides that cab riders see on the backseat TVs are the result of a partnerships that VeriFone and CMT have forged with TV networks (though the TLC commands 20 percent of the screen time on the primary channel for public service announcements). VeriFone has rolled out NBC content in 12,000 cabs across the U.S.

While we know that content can stream quite nicely on tablet devices, too — and likely provide an even slicker viewing experience — the companies are making money off of back-of-cab media and would lose that if they lost control of the screen. At the same time, more gaming and social networking options are being proposed for the back of cabs, which would provide potential ad revenue streams.

But ultimately the real sticking point could be fees. It’s unclear what a new payment structure would look like, but David S. Yassky, the chairman of the Taxi and Limousine Commission, has been quoted as saying he hopes credit card transaction fees could be lowered.

The TLC Web site currently says that cab owners can expect credit card and debit fees to average 3.5 to 4 percent, whereas Square charges its small-business users 2.75 percent per transaction without additional interchange fees. If Square offers taxi cab medallion owners — who also pay for the installation of the technology up front — a lower fee option on credit card transactions, the way it does for small businesses that shy away from investing in bulkier credit card systems, Square could have a leg up on its rivals.

And those rivals are unlikely to remain quiet.

Verifone has previously taken direct aim at San Francisco-based Square for what it alleged was a security flaw, saying that Square lacked the ability to properly encrypt data. (Square’s Dorsey quickly responded by saying that credit cards are inherently not secure, but that Square continually reviews, verifies, and stands behind the protections that it has put into place in its credit card reading device.)

For now, the San Jose-based payments giant isn’t offering a formal response to the new taxi cab proposal. A spokesman for VeriFone would say only that the company is not going to comment on a proposal nobody has seen yet.

According to the New York Times, Creative Mobile Technologies has also raised concerns about the security of Square’s technology and has previously requested that the vote on the proposal be delayed.

But if the proposal were approved next month, the pilot program using Square on tablets could kick off “within a month or two,” according to Allan Fromberg, a spokesperson for the TLC.

And that’s when things will get interesting in the back of taxicabs.

(Photo courtesy of Flickr/JosiSilva)

Enter Google Wallet, the search engine’s answer to this problem. This mobile app uses a chip in the phone so it can be waved in front of payment stations to buy things. Users set it up by registering a credit card to the phone or loading a Google Prepaid Card with a credit card. A four-digit password enables payment transactions. Google Wallet is rolling out this week to Sprint’s already available, $50 (after $50 mail-in rebate and with a two-year contract) Nexus S 4G phones by way of an Android operating-system software update.

A phone with Google Wallet and a payment terminal.

I’ve been trying Google Wallet in Washington, D.C., and Palo Alto, Calif., and I find it delightfully easy to use. Though still in its infancy, it isn’t hard to imagine digital payments catching on and becoming commonplace. But there are plenty of caveats.

Google Wallet works only with phones with an NFC (near field communication) chip, which allows secure digital transactions over a short distance. In Japan, millions of cellphone users have been using mobile wallets with NFC chips, but the technology has been slow to catch on in other countries. For now, the Nexus S 4G is the only phone in the U.S. that works with Google Wallet, though more phones are expected soon.

Paying with Google Wallet is possible only at stores that offer MasterCard PayPass. In Washington, D.C., near my office and home, these included Sunoco, McDonald’s, CVS and Papyrus; other stores include Home Depot, 7-Eleven, Best Buy and OfficeMax. A MasterCard PayPass finder is built into the app and displays nearby locations where PayPass works. These can be viewed on a map, in a list or filtered by category. For now, only 150,000 merchants have the equipment in stores to use PayPass.

Citi MasterCard is currently the only credit card that can be directly added to Google Wallet, but the Google Prepaid Card can be loaded with other credit cards. Google said it will also work with Visa, American Express and Discover cards, but couldn’t say when.

Several other companies are planning their own digital-payment solutions. Last week, PayPal said it would launch pilot programs at the end of this year for a cloud wallet, usable by entering a phone number and a PIN at the register. Square has launched Square Card Case, a free app available on Android and iPhone that works on the idea of paying with virtual tabs, like starting a tab at a bar. Both ideas from PayPal and Square would avoid the need for phones with NFC chips.

Next month, Google Wallet will let people register their store loyalty cards and gift cards in the app so a Wallet purchase at CVS, for example, would recognize my CVS ExtraCare card. Registering a gift card from, say Macy’s, saves the trouble of carrying the card at all times. (Currently, only American Eagle Outfitters allows loyalty cards and gift cards with Google Wallet in some of its New York stores.)

People also will be able to search for more store coupons on Google’s search engine and click to add them to their Google accounts for synchronizing with Google Wallet.

My first Wallet purchase was at CVS, where I picked up two boxes of tissues and a pack of AA batteries. I waited in the checkout line in anticipation of paying with just a casual wave of my phone. But when the checkout person asked if I had the CVS loyalty card, I still had to dig the card out of my wallet to swipe it for discounts. Once that was done, I waved my phone at the payment terminal, entered my four-digit security code and walked away.

When I bought lunch at McDonald’s, a woman nearby was in awe of my wave-to-pay method and said she couldn’t wait to get it. At 7-Eleven, the man working the register seemed startled by how quickly I paid for a bottle of water, especially after the guy in front of me had spilled several coins and bills on the counter to pay. I used my Google Prepaid Card at CVS and used my registered MasterCard at McDonald’s and 7-Eleven. Each card is represented in the app with an image of a credit card. My Citi MasterCard was the right blue hue and even had my name on it, with just the last four digits of the card number visible.

I added my Citi MasterCard to Google Wallet by entering my credit card information and creating a nickname for the card. After waiting a few seconds for the app to verify my information with Citi, an on-screen message said my card had a $100 limit, but that I could activate my full credit line using a code sent via text message to my cellphone number. This also allowed me to see more data about my account like my last statement balance, current balance and the last payment due date.

If a phone’s screen is in sleep mode, a user must wake it in order for transactions to work. This step was purposely added so people don’t unknowingly buy something when they walk by a PayPass terminal. The four-digit security code has an adjustable time-out period that can last for as little as one minute or as long as 30 minutes. I adjusted my code time-out to 15 minutes and was able, in two tests, to swipe my phone without entering the code.

Google Wallet can’t hold your driver’s license or other official forms of identification, so even if it takes off and works everywhere, you’ll still have to carry your license with you.

Write to Katherine Boehret at katie.boehret@wsj.com.

VeriFone CEO Douglas Bergeron told Bloomberg that his company anticipates acquiring one company a year at roughly $500 million to $700 million, along with several smaller transactions. In all, its purchases could add up to as much as $1 billion annually.

The San Jose, Calif.-based company is eyeing emerging markets. such as Turkey and Brazil, and is seeing investment opportunities by teaming up with Google and other players. Google Wallet enables Android phone users to link their bank accounts to their phones and use them to pay for items in a store, using near field communications.

The move to mobile payments may still be in its infancy, but as a major maker of credit card terminals, VeriFone must consider new entrants — such as Google –very disruptive. Earlier today, I wrote about how Apple products are becoming fairly mainstream at retail locations, and may increasingly reduce the need for registers.

In March, VeriFone lashed out against Square, the San Francisco start-up that has been getting a lot of press for offering a mobile-phone-based payments solution to small merchants. VeriFone claimed that the devices Square was handing out to anyone looking to accept credit card payments were not secure, but many considered the attack a sign of VeriFone’s insecurity in the market.

Since then, Square has started adding an additional level of encryption, and VeriFone has unveiled its own copycat product, which will allow retailers to use an iPad or Android tablet for in-store checkout. It also has other handheld devices for sale, along with iPhone-based swiping solutions.

VeriFone did not provide any hints as to what it may be interested in acquiring. However, Bloomberg suggested that VeriFone could be looking into adding distribution in Asia through an acquisition of a major terminal maker. Likewise, it could also be interested in a payment processor in countries where credit card penetration remains low but is growing. A payment processor would get VeriFone closer to merchants in those markets, and could enable it to offer additional services, such as coupons, daily deals and other loyalty programs.

And there are more significant deployments underway.

Lowe’s announced last week that it was rolling out 42,000 handheld devices at stores in the U.S. and Canada. That closely follows announcements by Home Depot, Nordstrom and Urban Outfitters.

While some of the retailers are a little shy about saying which devices are being deployed, for the most part they are using Apple products — an iPhone, an iPad or an iPod touch. And while the devices may eventually be used to accept payments, many of them are starting off as tools for salespeople to look up answers or to check on product availability.

It’s not just large retailers, either — small stores are also jumping on the mobile bandwagon.

I happened to see an iPad being used in a small winery in eastern Washington state. The device, which was mounted on a mechanical arm, was still in the process of being set up, as evidenced by the nearby iPhone, calculator, traditional credit card point-of-sale machine and cash register at the nearby counter. But a complete changeover was in the works.

And the list keeps growing, according to South Plainfield, New Jersey-based Global Bay, a company that develops mobile software for the retail environment.

It is announcing today that it is helping Pacific Sunwear, a retailer known for surfer-style apparel, to roll out iPads in 300 stores, with plans for 500 to 600 more by next year.

Global Bay CEO Sandeep Bhanote said he’s been in the business of mobile retail solutions for a long time, but it is “the Apple line of products that has reinvigorated the market and is bringing it [mobile] to the mass market … Everyone is looking at the Apple technology line. No one is looking at Android, or at the older generation of devices … It’s an Apple world in retail, although that could change next year.”

A variety of companies, including Google, Square and Verifone, are also racing to get a piece of the action.

Bhanote said Global Bay did its first iPad deployment last year, in November.

It was at a mall store called Things Remembered, and the iPad served as a self-service kiosk where customers could select the right engraving for a particular item, such as a jewelry box.

“Why not use the iPad to streamline the experience?” Bhanote asked.

Even in these early stages, there’s evidence that handheld devices may evolve, moving from tools that automate annoying or painful processes to becoming sales-generating machines.

“The next phase is introducing a commerce component,” he added.

Bhanote declined to say how many iPads it has helped to deploy in the past year, but said that retailers are already starting to see results. One retailer reported that it experienced a 12 percent increase in average order transaction when a customer was serviced with an Apple device in the store.

PacSun associates will carry iPads in the store to help customers place online orders when products are out of stock. Using an application built by Global Bay, store associates will be able to find a shirt or pair of shorts and then order it from the iPad, accept the customer’s payment and ensure it is shipped to the customer’s home.

Bhanote said for an apparel chain of that size, being able to close five more transactions a day per store means a lot of money.

However, there are still some logistics to be worked out. If a mobile device replaces the register, where do you store the cash? What happens if a salesperson drops and breaks that $500 device? Worse yet — what if a customer drops it?

Bhanote said PacSun is putting security tags on its iPads, so if someone walks out of the store with one, an alarm will sound. He said other customers have used rubberized cases for protection; in the case of the winery, there was that mechanical arm.

But the winery’s second iPad wasn’t as lucky. The device was being used by associates, who walked around the store with it, and it was accidentally knocked off the table by a customer. It was a very expensive lesson for a small company — especially when the customer only bought one bottle of wine.

Photo Credit: Beekman1802.com.

To do so, subscribers enter their phone number and a PIN code at checkout, rather than entering a 16-digit credit card number. The service will work for shopping on any Internet-connected device, including a PC, phone or tablet.

Subscribers will also have to sign up for a Serve account through American Express, which is very similar to a PayPal account and can be funded by a bank account or a credit card.

While the system is designed to make checking out more simple, it could take awhile for consumers and merchants to adopt it. Not only will Verizon subscribers be required to have a Serve account, but online retailers will also have had to integrate Serve as a payment mechanism.

“Yes, they have to be Verizon and a Serve customer, but we are preloading a number of devices — smartphones or tablets — with the Serve app, and when you preload there’s a much greater uptake,” said Dan Schulman, group president, Enterprise Growth, American Express. “They’ll be able to simply or easily transact for any size good, whether it’s a virtual good or hard good.”

Schulman declined to say how many customers have signed up for Serve since it launched in April, but said that the deal with Verizon Wireless is not exclusive, meaning it could partner with other carriers in the future.

Despite these hurdles, this may be a logical intermediary before we see people using their phones to pay for items in the store using near field communication. A number of companies are scrambling to become a player in the digital wallet space, including Google, PayPal, Square and the credit card and payment providers, so this will be one of many options consumers will be able to choose from.

Verizon Wireless has also formed a joint venture called ISIS with AT&T and T-Mobile USA that will launch a near field communication trial next year.

A number of companies have also pursued carrier billing as an option, but convincing carriers to allow large payments on the bill for physical goods has proven difficult. Companies that fall into this bucket include BOKU, BilltoMobile and Zong, which was just acquired by PayPal.

Up until now, the items most often charged to a carrier bill are ringtones, or virtual goods that are purchased inside online games.

Greg Haller, Verizon’s president of enterprise and government, said its partnership with American Express is not designed to compete with carrier billing or its ISIS joint venture. “We’ll still allow virtual goods to go on the bill, but the real opportunity now going forward is that a customer won’t have to go in a shopping cart and enter a 16-digit number. This really turns it into a one-click process. The benefit is the simplicity for the customer, who can now buy it on their phone, by entering their mobile number.”

Over time, additional services will be added, such as coupons and loyalty programs. One partner is vente-privee.com, a French-owned flash sales site that partnered with American Express to enter the U.S.

“We are pleased and we are deploying with more and more functionality all the time,” Schulman said. “We’ve announced a number of partnerships, all of which are being integrated, this being the largest and most strategic that we have. We’ll start to integrate and be in market [with Verizon Wireless] by the end of the year, and we have high hopes for it spurring mobile commerce.”

American Express and Verizon Wireless are also working with Payfone, a New York-based company that the two companies backed financially in the spring. Payfone is running all the authentication in the background to ensure that the phone number entered is valid and corresponds with the correct account.

How ironic. There’s a ton of cash being thrown around to find a better way to pay for things.

Consider the growing list of participants hitching a ride on this money train: Square is trying to create a better register, Google is attempting to build a better wallet, and then there are competing and overlapping efforts being made by the wireless carriers, handset makers, banks, financial institutions and others.

For example, here’s a company doing something as simple as creating a more high-tech credit card, one that doesn’t require customers or retailers to buy new equipment.

Pittsburgh-based Dynamics is announcing a $35 million round of financing — an amount CEO Jeff Mullen is quick to point out is bigger than Square’s last round of $27.5 million (not including a last minute addition by Visa). UPDATE: Before the ink was even dry on this one, Square announced late this evening that it has raised $100 million in a round led by Kleiner Perkins.

Dynamics’ round was led by Bain Capital Ventures with existing investors, including Adams Capital Management and a number of undisclosed angels also participating. The company’s first round raised in 2009 totaled $5.7 million.

While Dynamics isn’t a household name and doesn’t have the same visibility as Square or Google, it has received accolades for its technology. In January, Dynamics won best in show at this year’s CES in the personal electronics category.

So, what does it do?

It is making a more intelligent credit card.

Although it looks the same as the plastic cards you carry around in your wallet, it behaves much differently. Packed inside are a bunch of batteries and miniaturized electronics that can be used to program several credit card numbers and wiped clean if lost. It comes packaged in the same svelte form factor as a Visa or MasterCard, and don’t worry, it’s also waterproof.

A button on the card allows users to toggle between various cards, like a debit, credit or corporate account. Another model enables you to keep your number hidden until a security code unlocks it, and a third model retains information about your rewards points, so they can be spent at the point of purchase without having to wait for a gift card to be sent to you in the mail.

It may not sound as fancy as waiving a mobile phone in front of the register to pay, or even using an iPad as a register, but Mullen argues it’s more practical because it doesn’t require consumers to get new phones or retailers to upgrade their credit card terminals. “Our solution doesn’t require any change to the existing infrastructure,” he said.

The additional financing will be used to double the company’s staff from its current headcount of 30. It will also be investing in manufacturing to increase capacity since all three models are currently in trials, including a deployment with Citi. It is also working on developing cards for Europe, where RFID is a predominant technology.

It is also adding mobile payments to the company’s road map, even though Mullen is not a big believer in the technology. Because of the hardware limitations, he thinks it will take longer for it to be adopted widely.

He declined to say whether the solution would use near field communication chips or some other technology. “Dynamics wants to be the innovation leader for an industry that’s never had innovation. We want to innovate in all areas of tech,” he said.

Mullen said the goal is for the banks to be able to save money or generate new revenue to offset the additional costs of producing a more high-tech piece of plastic. One way is through preventing fraud, another way is by eliminating the cost of mailing gift cards to consumers who would like to redeem the points they earned on rewards cards.

This will be the first time vente-privee, which translates to “private sale,” will enter a non-European market. The site is expected to launch late this year, and like its counterpart in France, will offer designer apparel at low prices for limited amounts of time to people who sign up for a membership.

Vente’s move to the U.S. was expected. The joint venture with American Express was not. One might even go as far as to call the match-up perplexing. (Maybe we should warn vente-privee now that American Express is a credit card-issuer and not some sort of patriotic speedy deliver service, like FedEx or UPS!)

As part of the agreement, the two will be equal partners. However, terms of the deal were not disclosed, such as the size of investment or the kinds of resources the companies would be required to contribute.

To be sure, vente was wise to enter into a partnership for its North American debut. It’s the American Express part that’s easy to get hung up on.

Despite vente-privee being more than a decade-old and well established in Europe, it will be walking down an already crowded catwalk. Many start-ups here have done a good job imitating vente’s model and making it its own. Perhaps its closest competitor is Gilt Groupe of New York, which just raised $138 million. Also a contender is ideeli, which just lined its pockets with $40 million in cash. Others with offerings include Amazon and Nordstrom.

Earlier this week, Gilt’s CEO Kevin Ryan downplayed the significance of vente’s impending entrance in an interview with me (like a model would diss another model’s photo shoot).

“There’s only one player in the world to watch,” he said. “But if you weren’t covering this business, you would have asked ‘Who? I never even heard of them.’ That’s the reality, and for them to enter, they’ll have to set up warehouses and sign up members. Basically, you are a start-up…I don’t worry about international players, even ones that are bigger than we are.”

American Express presumably won’t be able to help vente with warehouse space, but the two claim to have a few synergies. In a press release, American Express Enterprise Growth President Dan Schulman said that both brands have a heritage in the luxury market and place a high premium on delivering quality customer service.

Schulman has been busy heading up American Express’s two-month-old digital payments platform, as of recently. He characterized the joint venture as helping the company reach a new audience. Earlier this week, American Express started working with SCVNGR’s LevelUp app to help redeem coupons at a few Levi’s stores.

Founder Jacques-Antoine Granjon didn’t reveal anything more in his statement, either: “The brands where we have strong relationships are excited about extending their offerings into the U.S. market through this joint venture. There is no question that American Express was our partner of choice. As leaders in B2B and B2C market approaches, we will now combine our skill sets to deliver experiences that are unmatched in the U.S. market.”

This morning, Visa unveiled a digital wallet that includes “click-to-buy” features for making e-commerce payments. The program is expected to launch in the fall in the U.S. and Canada. More advanced features, such as mobile payments, will launch in other countries first, where mobile usage is high, but card issuance has historically been low.

In the emerging markets, it said very politely that it will “aid in the complexity of the myriad of network operators, handset models and operating systems,” which is code for it’s a big mess so we have nothing to announce now.

Visa’s click-to-buy features will compete directly with Amazon’s 1-click and PayPal services, which are used by many merchants across the Web to speed up the check-out process by only requiring a username and password instead of having to type in a credit card number.

PayPal issued a statement reacting to the news today: “PayPal was built 12 years ago because traditional payment methods weren’t designed for the digital world. We’re light years ahead: More than 98 million people around the world have already trusted us with their digital wallets.”

While ultimately most charges made on PayPal and Amazon end up on a credit card of some sort, this announcement today positions Visa to have a more direct relationship with the card owner to add on additional money-making services. The announcement also will enable the company to compete directly with electronic payment providers, like PayPal and Amazon, as well as other card issuers, such as MasterCard, American Express and Discover, which are all working on new hybrid digital models for the future.

It’s teamed up with 14 or so banks, credit unions and other financial processors to roll the services out.

Key features include:

• Click-to-buy: Users will have an online ID and password to make e-commerce purchases instead of using an account number. This will be easy to use across both e-commerce and mobile commerce, and include such activity as paying for virtual goods inside of a game.
• The Wallet: Users will be able to store multiple accounts in the digital wallet, including non-Visa payment accounts.
• Merchant offers: Users will be able to opt in to receive discounts or promotions.

But don’t read too much into that.

The decision has everything to do with obeying Visa’s best practices and nothing to do with the accusations of security flaws raised last month by VeriFone, the 900-pound gorilla in the space.

Does it mean VeriFone’s concerns are just a teeny-weeny bit valid?

“Absolutely not,” said a Square spokesperson. “Of course, Square meets or exceeds all current industry standards. We are confident that Square already reduces the overall risk in the payments ecosystem….As Square is everywhere, we wanted to work with Visa to raise the bar on security for the next decade.”

The feather-ruffling started last month when VeriFone issued a fairly bold attack on Square, the San Francisco venture-based company founded by Twitter co-founder Jack Dorsey. VeriFone wrote an open letter to the industry alleging security flaws in the product and also produced a video detailing how easy it would be to steal a cardholder’s information using a Square card reader.

Square’s response was that the claims were not fair or accurate and that they overlooked all of the protections already built into your credit card.

A lot of comments on this site and others felt the attack was unnecessarily harsh and pointed to VeriFone’s insecurity with their position in the market. While admittedly unconventional, VeriFone’s CEO Doug Bergeron explained his reasons in a lengthy interview. “We collectively need to create new technology to reduce fraud, whether you are a venture-backed business or a big business. We are both responsible for our own decisions and should be able to fend for ourselves,” he said.

Now, Square seems to be caving on the core issues of that debate. And VeriFone is claiming victory. Of course.

In a statement, Paul Rasori, VeriFone’s SVP of marketing, said: ”It appears that Visa’s investment in Square would not have happened without a commitment from Square to address the lack of security of their payment card readers. The industry heard our concern, and Square finally decided to take security into consideration by including encryption on their mobile payment device later this year.”

The security concerns were addressed yesterday in a blog post by Visa and another by Square’s COO Keith Rabois.

In Visa’s post, it announced that it had come up with its own best practices for the mobile industry for merchants, software developers and device manufacturers to follow. One of the many things it called for was encryption of cardholder data at the the card reader. “We are pleased that Square, the Jack Dorsey start-up that enables small businesses to accept card payments through mobile devices, has expressed its support of Visa’s best practices and its intent to adopt them.”

Rabois wrote: “The adoption of best practices will help increase trust in innovative payment solutions. Of course, Square complies with all current industry standards, and we are committed to meeting or exceeding industry guidelines as they evolve–all while keeping our card reader free.”

The service, which falls under the broader category of person-to-person payments, is part of a growing effort to replace cash transactions.

Other credit card issuers have launched similar services to make it easier to pay the babysitter, a friend or small business without going to the ATM or writing a check. Visa and American Express have made recent announcements, and there are companies like Square that want to help small businesses accept credit cards.

Discover’s service, Money Messenger, is powered by PayPal, which announced the partnership back in October.

Discover, which has millions of cardholders, is the first credit card issuer to go live on PayPal’s third-party payment platform, said Dan Schatt, PayPal’s head of financial innovations.

Schatt said by leveraging PayPal’s services, Discover’s customers can send money to people in 60 countries, as long as the other person has a mobile phone number or email address. The recipients must have a PayPal account, or can open one after the fact. There are roughly 230 million registered PayPal users today.

Other than awareness, there are few hurdles or costs involved.

A Discover customer does not have to have a PayPal account, and it is free to send cash to people. In fact, the payment is treated as a purchase transaction, so members will receive cash back for every transaction, which roughly equates to .25 percent for the first $3,000 spent.

“It’s so strategic and compelling,” Schatt said. “Banks have never been able to penetrate the cash or check market, and cash still dominants. The reality is, people will still pull out $200 to $500 from the ATM and dole it out for various payments over several weeks, or they write checks and banks don’t benefit.”

Discover can use it as a way to find new customers and increase transactions on its network. It’s also, potentially, a defensive move against other technology companies, such as Amazon, Google and Apple, which are likely prepping payment services of their own.

People who receive money from a Discover member will be given the opportunity to sign up for a card.

In a statement, Mike Boush, Discover’s VP of its Ebusiness, said: “This offering provides Discover cardmembers with another way to help them earn rewards on more types of purchases and give them the ability to consolidate and track more of their spending on one payment vehicle.”

The move is significant because it puts Square’s new rates below the industry standard for small merchants, who typically do less than $1,000 a month in business.

Square is taking the high-risk bet that cutting the rate will fuel its gain in market share as the race heats up in the mobile payments space.

“In the short-term, we will sacrifice revenue, but we believe it is worth the cost because it is the right decision for users and by simplifying payments it will help grow the entire market,” a spokeswoman explained.

Square’s rates will fall to a flat fee of 2.75 percent per transaction instead of charging 2.75 percent plus an additional 15 cents. (The rate for when a credit card number is keyed in, rather than swiped, will remain the same at 3.5 percent plus 15 cents.)

Square’s new rates will resonate well with merchants.

It means that for a $100 purchase, they will now pay $2.75, rather than $2.90. The impact will be much greater for smaller purchases, like a $3 cup of coffee that will now cost the merchant 8 cents, down from previous 23 cents.

There’s also a benefit when a customer visits a coffee shop twice in one day, for example.

Under the old rates, the merchant would have to pay 30 cents for a customer who visits twice a day in transaction fees alone. But under the new rates that goes away and the merchant will only be charged a percentage of both transactions.

Square, which recently raised $27.5 million in venture capital, is trying to gain a foothold in a market that remains inaccessible to many small vendors, who aren’t willing to spend thousands on a point of sales machine.

Instead, it offers merchants the option of plugging a small dongle into a smartphone, such as an iPhone, iPad or Android device to accept payments.

In the mobile payments space, Square competes directly with services being built by mammoth financial incumbents, as well as others like Intuit, PayPal and the wireless carriers.

Intuit, which also provides an accessory for smartphones to take payments, charges 2.7 percent plus 15 cents with no monthly service plan. A high-volume account, which charges more than $1,000, costs $12.95 a month, but drops the rate to 1.7 percent plus 30 cents.

Will Intuit drop its prices to compete with Square?

Possibly. After Square made its card readers free, Intuit followed suit, and said last week that after a short trial period, it was committed to keeping them free permanently.

To be sure, the fees can be baffling to a small business owner.

In a survey, conducted by the Merchant Bill of Rights, it found that only 26 percent of participants believe they are being treated fairly by the debit/credit/prepaid card processing industry, and only 21 percent understand the rates, fees and surcharges they pay.

Still, Square will clearly be taking a financial hit.

It will have to continue to pay the fees being demanded by credit card companies like Visa and MasterCard. But the company said it continues to negotiate these rates with providers.

There is some hope a compromise can be reached.

Recently, Visa wrote about Square in a blog post, referencing a recent interview we did with Square’s CEO Jack Dorsey, who is also the co-founder of Twitter. In the post, Visa said Square provides an easy payment solution for small merchants. It wrote: “We are committed to working with innovative companies, like Square and others, as the world shifts to electronic payments.”

While the Consumer Electronics Show and other big events feature acres of tiny booths crammed one against another, Mobile World Congress features a different kind of bigness. The show is spread out over eight big buildings in a historic area of town. Every couple of buildings are set several flights of stairs up from the last one, with the final two buildings just a stone’s throw from the grand National Palace.

Connecting the buildings and lining the promenade between them are various smaller trailers and bungalows.

Unlike the cramped booths at CES, the spread-out nature of Mobile World Congress allows even moderate-size companies a good amount of space to show their wares. Even those with bungalows outside a main hall stand a good chance of attracting visitors. Companies that went with that approach included Acer and INQ Mobile, which was touting its new Android phone with quick access to Facebook and Spotify.

That said, some folks’ presence at Mobile World Congress is clearly bigger than others.

One booth that stands out is Google’s first-ever Android booth, tucked in the corner of Hall 8, just inside the entrance.

The two-story pavilion features many of Google’s partners showing Android applications, as well as a place to create one’s own Android mini-me, plus a sushi-bar-style conveyor belt featuring the many phone and tablet designs based on the Google operating system. Among the designs that scrolled by while I was standing there were well-known names such as Samsung and HTC, as well as less-familiar brands such as China’s ZTE and Alcatel, which is new to Android.

Perhaps the pièce de résistance of the booth is a slide that allows children of all chronological ages to relive their youth and glide down from the top floor back to the bottom. The most popular thing, though, was a series of collectible pins being passed out throughout Mobile World Congress by various Android partners. They were a hot commodity, and by Tuesday afternoon most booths were completely out of their supply of pins, placing green candy inside the dishes instead.

While impressive, the Android booth was not the largest by any stretch. One of the more massive setups I saw was the Ericsson booth, which occupied nearly all of Hall 6. A small Sony Ericsson booth was open to the public. Behind a security gate, though, was a massive spread for the many partners of both Ericsson and Sony Ericsson. It featured two bars and two kiosks serving various tapas.

There were meeting rooms and patio tables for more-casual interactions. On display were all kinds of Ericsson technologies ranging from its core infrastructure gear to all kinds of other products and research projects.

A few caught my eye, including a mobile payment section that featured a “Museum of Money” talking about days gone by when people used paper currency with all its flaws. Under glass were such relics as money, piggy banks and counterfeit-detection pens, while Ericsson showed off its many payment technologies.

In another corner, Ericsson was showing off a vending machine that is paid, not with cash or credit card, but via SMS message. Ericsson has a unit that serves as an intermediary between the vendor and the carrier to manage the transaction.

Singly was founded by Jeremie Miller, who created the open-source instant messaging protocol XMPP. It won the O’Reilly Strata data conference‘s start-up competition this week, and has already raised some funding from individual investors. (I’d hoped to attend Strata in person, but got caught up in an endless stream of little news items this week.)

Giving users clearer ownership and better access to their data is a geeky topic but an increasingly relevant one, for privacy and other reasons.

Singly will reportedly offer a hosted version of the Locker Project, or just the code itself, for users to collect their participation on social media sites and even their click streams, financial records and heart-rate monitors. This concept is known as “exhaust data,” i.e., what users emit as they motor around the Web.

Then, Locker Project users can run yet-to-be-built apps to analyze their exhaust data in order to find patterns, make recommendations, set alerts and do whatever else they can imagine.

So many things we do these days can be recorded, and already are. Rather than just allowing behaviorally targeted advertisers, governments and credit card companies to stalk us, the thought behind projects like this is that we users can gain value out of stalking ourselves and analyzing our own data. I wrote a bit more about the justifications for this stuff during my old gig at GigaOM.

And to be sure, other companies and organizations are exploring the idea of personal archives too–for instance, the recent Y Combinator start-up Greplin is building a unified personal search tool that members can use on their email, calendar, storage and social Web accounts.

However, even with the masses descending upon Las Vegas this week, Cricket has decided to delay the Muve music service and the launch of its first Muve-compatible phone.

Cricket had hoped to launch service in Las Vegas this week along with a number of other markets later this month.

Under its revised time frame, Cricket plans to launch the service in Las Vegas later this month, add nine more cities in February and roll it out to the rest of its markets this spring.

Although all the necessary licensing is in place, Cricket spokesman Greg Lund said that the company needed the extra time to ensure all of the software bugs were ironed out before it started asking customers to pay for the service.

“It’s got to be just perfect,” Lund told Mobilized in an interview at CES in Las Vegas.

Think of it as the equivalent of iTunes for Android.

Developers will be able to upload apps–including games and other digital content–to Amazon, which in turn will promote and distribute them on Amazon.com and also on mobile phones. (I can hear the promotions now: “If you liked that app…what about this one?”)

In a blog post aimed at developers, Amazon writes that it’s trying hard to get developers recognized among the hundreds of thousands of apps out there: “Amazon’s innovative marketing and merchandising features are designed to help customers find and discover relevant products from our vast selection, and we’re excited to apply those capabilities to the apps market segment.”

For the past few months, Amazon employees have been reaching out to developers to find out pain points and drum up support for this day.

So far, it looks like Amazon has listened to concerns. The developer portal looks insanely easy to use–anyone with a regular Amazon username and password can access it. Right now, the annual fee of $99 has been waived, and once you agree to a seven-page app-store distribution agreement, you can start uploading applications to the network, and eventually see metrics on how well they are performing.

Much of it sounds like iTunes.

Amazon will share 70 percent of revenues with developers, and the distribution agreement hints it will go worldwide. For now, it will be limited to the U.S. Amazon will handle all the bill processing, which is complex, especially on a global basis. Google learned this the hard way, and continues to support only paid apps in some countries. Amazon will also have some sort of approval process, but it’s unclear how rigorous that will be.

Launching an app store is not a stretch for Amazon. It’s been selling MP3s on phones for some time and has a large digital catalog, spanning books and videos. It also has a built-in payment system and access to tens of millions of Amazon customers, many of whom have their credit card information on file, as with iTunes or PayPal.

The one question is whether the business will provide enough scale for an e-commerce company of its size. After all, most applications today are free, or really cheap. And at least for now, Amazon is limited to the Android operating system.

True, Android is quickly gaining on Apple, especially in the U.S. According to Nielsen’s latest figures, the iPhone’s market share is 28.6 percent vs. RIM’s BlackBerry and Google’s Android platforms, which are essentially tied in second place with 26.1 percent and 25.8 percent, respectively.

There are two potential scenarios that will help pencil this out: The app store could help drive more sales of other content or products on the phone for Amazon. A more farfetched scenario is that Amazon does such a good job that other platforms or handset makers, like BlackBerry, Windows Phone, HTC or Samsung, will choose to outsource or adopt Amazon’s platform for a cut of the revenues.