PayPal (for iPhone)

Wallet-less mobile payment systems will be on the cusp any day now. Mark my words. Over the past few months, while this trend has gained momentum, I've been hunting for the best solution for turning my iPhone into its own payment method. After trying the PayPal mobile app for iPhone (free) for more than a week, I can safely say that my quest for the ultimate way to pay must continue.

PayPal's iPhone app does provide all the benefits of PayPal Purchase Protection, the company's nearly iron-clad guarantee that you will either receive the goods and services you bought, or you'll get your money back. The service also adds a layer of security between your credit card and the vendor, further helping to keep your credit card digits private.

But in real world use, the PayPal app just comes up short. Too few vendors accept it, even in a metropolis like New York City, where I have found plenty of businesses that support much more niche payment systems, such as LevelUp and Pay With Square. The PayPal app is only useful for exchanging money among friends.

Basic Features
Because PayPal for iPhone has attempted to be a mobile payment service, it has a standard geolocation feature that lets you find merchants nearby who accept it. I tried the app in New York City and found a dearth of retailers. Usually, in reviewing mobile payment apps, I have to add a disclaimer about how New York surely has greater support for such a service than you're likely to find in more suburban or rural areas, but with PayPal, the selection was so limited I can't imagine it would be more slender anywhere else.

I found a coffee shop within two miles, but on searching for it online (I had never heard of it before and wanted more information before showing up), I learned it had closed. There was a lawyer nearby who took PayPal, a consulting service, and The Richard J. Fox Foundation for prostate cancer. A lot of the vendors looked like single-person small businesses whose "locations vary" rather than those set up in brick-and-mortar offices and retail outlets.

If you do manage to find a business that accepts PayPal, paying for a purchase works similarly to how Pay With Square handles it. You find the business in the app, slide a toggle on screen to allow the merchant to see your username, and then tell the cashier what that username is. The cashier will then choose your username from an available list, and thus charge your account.

Paying with PayPal in stores isn't all it's cracked up to be, but swapping money among friends is. PayPal's mobile app makes it even more convenient and easy to pay back a friend for dinner or a movie ticket in seconds. As long as you have the person's email address associated with his or her PayPal account, you can initiate a transfer in a few taps. It's simple and straightforward. You can also request funds from a specific person, which is useful for reminding leeches of the money they owe you.

The ability to transfer money among friends isn't wholly unique to PayPal (you can find it in Bump for iPhone, ING Direct bank's mobile app, and in a few others), but it isn't a feature in all the other mobile wallet solutions. You can't give or receive money to or from another individual using Pay With Square, LevelUp, or Google Wallet.

Security
PayPal's app only partially passed muster in terms of security. It gets a lot of security measures right, but gets one big option wrong.

As mentioned, all the usual PayPal Purchase Protection coverage applies?and it is superb. Everyone I know who uses PayPal says they trust it more than any other credit card company or bank, bar none. That consumer confidence is certainly not to be discounted.

The app also offers options for how you can log in. To set up the app, you have to enter your PayPal username and password. You can continue using as your PayPal credentials to log on, or switch to a numerical PIN, which requires authenticating your iPhone's phone number. When I tried to switch to the latter method, I opted to authenticate my phone via text message. PayPal sends you a text with details on how to reply, and that should be the end of that. But it failed. When I replied, I received back this message: "PayPal: PayPal Mobile isn't available. Try again later" (see the slideshow). I followed the alternative instructions?use PayPal's website ?and received another message soon after confirming my device had been added to my PayPal account. Despite the hiccup with the servers, the option to use either a PIN or your PayPal username and password is solid.

But there is one major hole in the PayPal iPhone app's security: The app never logs you out automatically. Most mobile payment apps log out the user after a few minutes. That's how Google Wallet (for select Android phones only) works, for example. After a specified period of time, you have to re-enter your PIN no matter what. In PayPal for iPhone, though, the timeout period is exceptionally long. The app only locked me out due to a timeout once, and only when the phone was on and active the whole time. If you simply close the app, it doesn't log you out, and it doesn't seem to count toward the timeout period. To fully log out, you have go into the settings and press "Log Out." Closing the app doesn't do the trick, but I definitely think it should. Say I close the app and turn off my phone, but someone else picks it up and re-launches the app; the app would still be in the open state. The person could easily get into my PayPal account to request or send money without ever having to enter the PIN.

What a miscreant with my phone could not do, however, is mess with my bank accounts or other financial information connected to PayPal. From the app, you can't even add a new account, leaving you pretty well stuck if you forget to notify PayPal that you have a new account. You can only add new accounts through the PayPal website. Other mobile apps in the money-management space do allow you to add new accounts from the app, namely Adaptu Wallet and Pageonce (two personal finance apps), without any security concerns, so it is possible.

PayPal Among Friends
PayPal could have been a contender among mobile payment systems, but it doesn't have enough support on the business side?at least not in New York, a city that is more likely to over-represent businesses than under-represent them. In other words, if PayPal isn't well supported by businesses in New York, it's highly unlikely to be popular elsewhere. If your family and friends use PayPal, though, for its excellent consumer protection, then the iPhone app may come in handy for initiating or requesting payments on the go.

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