PayPal has released Version 3.0 of its Android app, which is available for free at the Android Market. The update includes a feature to transfer money directly from one person to another (P2P) using NFC technology.

In order to use the feature that was already announced in July at their blog the user needs a NFC-enabled Smartphone, the Android app and the Request Money widget. Unlike Google Wallet or ISIS, PayPal Mobile cannot be used to pay at a NFC-enabled POS, but to send money directly from one NFC capable smartphone to another. The transfer is initiated by typing in the amount in the Request Money widget and taping the phones together. PayPal has offered similar functionality in the past using Bump but using NFC makes it easier.

Check out the embedded video to see how the PayPal’s NFC P2P Payments work: