PayPal has revealed its new mobile payment solution for small business PayPal Here. Just like Jack Dorsey’s Square, PayPal Here enables small merchants to accept card payments. The service includes an app and a small card reader for smartphones and brings the online payments giant into local stores.

It is no surprise that PayPal is entering the mobile point of sale segment, the success of Square, Intuit GoPayment, and iZettle prove the increasing demand for such services. PayPal Here is part of PayPal’s multichannel strategy; the company is trying to provide payment solutions for online, offline and mobile business.

How does it work?

PayPal Here includes a small triangular card reader and a free app for iOS and Android devices, allowing merchants to accept payments by swiping cards. The card reader is full encrypted and PCI-compliant. The card information can also be manually entered into the app. Unlike its competitors PayPal Here also allows users to scan cards and checks using their phone cameras – a service provided by mobile payment startup card.io.

After signing up and downloading the PayPal Here app, merchants can immediately start accepting payments and receive funds directly into their PayPal account. Merchants pay a fee of 2.7% for each transaction. They will also receive a business debit card with 1 percent cash-back on eligible purchases, cutting the effective fees down to 1.7%. For comparison: Square’s merchant fee is 2.75% for each swiped transaction.

The PayPal Here card reader and merchant app will roll out in United States, Canada, Australia and Hong Kong within the next month (more countries to be announced soon).

Check out the embedded video to see how PayPal Here works: