PayPal brings NFC money transfers to Android, starting with Nexus S

Online payments enabler PayPal today unveiled its first NFC (near-field communication) solution for Android devices at the MobileBeat 2011 conference in San Francisco.

Laura Chambers, senior director of PayPal Mobile, showed off how PayPal’s new NFC Android widget can be used to transfer money simply by tapping together two Nexus S phones.

The addition of NFC is a big step for PayPal, a company that has already been dealing with mobile payments for some time via apps. Now instead of opening up PayPal’s app and filling out a money transfer on your Android smartphone, you can save time by tapping a payment request into a widget (assuming you own an NFC-equipped phone).

The NFC transfer process is simple (see video below). You can either request to send or request to receive money via the new PayPal widget. Once the request is sent, you simply hold the phones together until they buzz, then enter your PayPal password or mobile PIN, to complete the transfer.

At the moment, the NFC transfers only work on the Nexus S, since it’s the only Android phone with NFC capabilities. But with more Android phones on the horizon, it won’t be long until more users will be able to take advantage of the feature. And PayPal won’t have to make any extra effort to make its app compatible with future NFC phones, since it’s relying on Google’s publicly available Android NFC software development kit.

PayPal’s NFC transfers rely on the technology’s peer-to-peer specification, Chambers told VentureBeat in a phone call yesterday. The transaction takes place via an encrypted token between the devices, and it doesn’t touch the NFC secure element, a portion of the NFC chip for storing secure data like credit card information.

Chambers said PayPal has been working on this specific implementation for a few months, but the company has also tested the technology for years (all the way back to older Nokia handsets). She expects the widget to be available later this summer.