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.