PayPal and mobile operator Softbank are getting together to launch a joint venture in Japan that should extend the payment subsidiary’s reach in Asia.

It’s a 50-50 effort for PayPal, which is owned by eBay, and Softbank. Each company is investing 1 billion Japanese yen or $12.5 million into the venture and they’ll each pick three directors. Softbank Mobile’s director and senior vice president Hiroaki Kitano will be CEO of the newly formed company.

On top of that, the two companies are bringing ‘PayPal Here,’ that triangular dongle that naturally invites comparisons to Square, to Japan as well. That makes it the fifth country after the U.S., Canada, Hong Kong and Australia to get the service. While Square had a head start in the U.S. on processing payments from small businesses that wouldn’t otherwise be able to afford point-of-sale terminals, it doesn’t yet have international reach. The company only processes payments in the U.S.

PayPal says the Japanese retail commerce market alone is worth 134 trillion yen or $1.7 billion. On top of that, about 31 million smartphones will ship in the country this year. (Just for reference, there have been between 500 and 600 million Android and iOS shipments to date.) Softbank has more than 25 million mobile subscribers and is one of the biggest carriers in the country.

As NFC continues to see growing adoption, we are still noticing mobile payment solutions that don’t use the technology picking up more traction — and funding: one of the latest comes from Germany, where a Berlin-based company called Orderbird has picked up a €2.7 million ($3.5 million) round for a service that lets restaurants use iOS devices to take customer’s food orders, send them to the kitchen and act as a “cash register” to process the payments at the end.

The round was led by Alstin, a holding company headed by German financier Carsten Maschmeyer, who invested €2.4 million, with another €300,000 coming from angels and existing strategic investors backing Orderbird. (They include Lars Kamp, Carlo Kölzer and Tom Köhl.) The company has raised €3.2 million ($4.2 million) since opening for business in February 2011.

The funding for Orderbird comes at the same time that companies like Square and PayPal, with its Here service, continue to make inroads with their own non-NFC-based mobile payments services. And the food services side of the equation has seen an equally big push, with Just-Eat earlier this week raising $64 million for its online takeout aggregation service.

A service like Orderbird could become a likely partner for a company like PayPal, which offers the payment piece for merchants but little in the way of customized services to make that payment integrated with other functions. And given that PayPal has not yet expanded Here to Europe, partnering with a company building up relationships and a customer base here could be a useful way for PayPal to make a quick entry.

Jakob Schreyer, the founder and CEO of Orderbird, says there are already 300 paying customers using Orderbird in Germany, Austria and Switzerland, where the service integrates with products from companies like Epsom and Matrix POS (another strategic investor), which are already widely used in point-of-sale services.

He says the company plans to use the funds to extend that to further European markets like the UK, as well as to start making moves into the U.S. later this year.

Orderbird is hoping that its payment solution, which has been specifically tailored to the restaurant trade — featuring ways of customizing menus and offering other tags that are typical for food ordering, as well as an analytics tool that lets a restaurateur look at all the data that gets collected through the system — will help it compete in a crowded market all competing for the same piece of business from the multibillion-dollar food service industry.

In the U.S. it will face significant competition from the likes of the mobile payment consortium Isis, as well as solutions more specifically aimed at the same restaurant sector Orderbird is targeting, such as POSLavu, among others.

That’s where the funding will also come in handy, in the form of beefing up the product and business to get more competitive advantage. Schreyer says Orderbird plans to hire more engineers and sales people as it looks to expand the kinds of services it offers through its platform. Future products that Orderbird is currently trialling include services that let users order their own food (instead of via a waiter), either in the restaurant itself or as a pre-order ahead of visiting the venture to pick it up.

ifeelgoods has a brilliant idea — letting you earn Facebook Credits for ecommerce purchases or following a brand on Twitter — but now it has to convince big companies and shopping sites to adopt its tech. That’s why it’s hired former Google Managing Director of Commerce Sales and leader of PayPal’s enterprise sales team Tyler Hoffman to be its new Senior Vice President of Sales.

ifeelgoods is starting to snowball, as CEO Michael Amar says 92% of customers returning to ifeelgoods and increasing their budget by 250%. Of my years in tech, this is one of the most promising startups I’ve seen. Because virtual currency is so cheap to distribute and is highly valued by some consumers, ifeelgoods could become a big disruptive force in how businesses acquire customers.

This is how the $8 million-funded ifeelgoods microincentive model works. The startup buys Facebook Credits from the social network in bulk. These Credits normally cost gamers $0.10 each, and are used to buy virtual goods, power-ups, and play time in social games, as well as music, movies, and other digital media. Possibly the world’s most popular virtual currency, more and more people want Credits, but many don’t want to pay for them because, well, they’re just for fun.

Ifeelgoods finds companies with specific actions they want people to take, and lets them incentivize these actions. So you could get 50 Credits for making a $50+ clothing purchase on Gap.com, 10 for installing a new Facebook game, 5 for signing up for Universal Pictures’ email list, or 3 for following the Dallas Mavericks basketball team on Twitter. Once you’ve completed an action, you approve the ifeelgoods Facebook app, and the Credits are deposited into your account.

Clients pay ifeelgoods for the Credits plus a fee. Walmart, Netflix, 1-800-Flowers, and Coca-Cola are a few more of its 70+ clients, but Hoffman is tasked with getting more brands on board. His 16 months at Google, seven years at PayPal, and three more doing sales for CNET should help.

Here’s a few reasons I believe in the model: distributing Credits is cheaper than mailing coupons, small incentives are more attractive than discounts since they don’t expire can be spent anywhere that accepts Credits, they’re viral since users get a chance to share news of being rewarded, and ads offering Credits get higher click-through rates than those offering traditional discounts.

Not everyone’s willing to pay money for social games and digital media. But with ifeelgoods, they can pay with their time, contact info, or choice of where to shop.

During eBay’s earnings call today, eBay CEO and President John Donahoe said that over 200,000 merchants have signed up for PayPal Here,  the company’s Square-like mobile payments hardware and software platform for small businesses. We haven’t seen any sign-up numbers for the mobile payments service since PayPal revealed it was seeing 1,000 new registrants per hour for the new service.

As you may have heard, PayPal Here offers a triangular add-on that plugs into the headphone jack on your smartphone. Merchants can then accept payments by swiping cards with the thumb-sized card reader or can use the smartphone’s camera to scan credit cards (powered by Card.io), scan checks, etc. PayPal Here offers a flat rate of 2.7 percent for card swipes.

Donahoe says the reader will launch to the public in the second quarter, and will be available in the US, Canada, Hong Kong and Australia at launch. He adds that he’s not sure they can manufacture enough PayPal Here devices to keep up for demand.

For basis of comparison, over 1 million merchants currently use Square to accept credit cards (which is a data point that was released in December, so this number could be higher).

Donahoe also said during the call that eBay would be improving the marketplace checkout experience, search and discovery on the platform. With regard to NFC, Donahoe says that it will be at least a couple of years before you see adoption of NFC at large retailers.

As we heard over the past few months, PayPal is ramping up its payments options for large and small merchants. The payments giant debuted an in-store payments platform for large retailers; PayPal Here, a card swiper that attaches to a mobile phone for small businesses; and hinted at a brand new PayPal wallet. Today, PayPal is rebranding its services for small businesses as PayPal Payments, which suite of business products with three tiers of capabilities to give US small businesses multiple payment options that work for them.

Peter Karpas, North American Vice President of Customer Engagement at PayPal, tell us that this is next evolution of PayPal’s payments product for small businesses. “As the lines between online, offline and mobile are blurring, we are doing a comprehensive revamp of our products, allowing small businesses to get paid however they do business.”

Previously, PayPal’s suite of product for small business were named “website payments,” and offered standard, pro and nonprofit plans but focused on web payments. Now, PayPal is moving beyond this by offering offline, mobile, and other payments options bundled with web payments. The company has dropped the word “website” from its US product names to represent the company’s move away from the online payments platform to a multi-platform, multi-channel offering.

PayPal says every tier offers an integrated suite of products that makes it easy to take payments from mobile devices and in-person, as well as online. Each tier includes the ability to implement online payments via PayPal, in-person, offline payments via PayPal Here, mobile payments via PayPal’s checkout services for the web and apps, as well as invoicing. The suite also includes a debit card, which gives merchants access to cash in their PayPal account, with 1% cash back when they sign for purchases.

There are four tiers, including standard, pro, advanced and nonprofit plans, based on features available. Nonprofits have a discounted per transaction rate (2.2 percent vs 2.9 percent for all other plans). All the rates include online payments support, PayPal Here, the ability to accept checks, global payments, telephone support and more.

Advanced holds a $5 monthly fee, and Pro has a $30 monthly fee. The standard rate does not include the ability to complete payments without customers leaving the website. The Pro rate gives merchants the ability to accept credit cards via the phone, fax and mail. And Pro users can design their own checkout pages.

For PayPal, this is a move toward exposing small businesses, especially those who mainly use its web products, to some of the other payments platforms the company has been launching, including mobile checkout and PayPal Here.

There’s no shortage of apps that help people find cheap gas these days, but apps that let you pay for it? And ones that give you a discount for doing it? Sign me up. The Boston Globe’s Scott Kirsner reports that regional gas station/convenience store chain Cumberland Farms has done just that with their new SmartPay app, which in addition to letting users pay without leaving their seats, offers them a $.05 cent/gallon discount.

Here’s how it all goes down: once a driver signs in with a PayPal account, they can pull into a supported Cumberland Farms location and fire up the iOS/Android app or the mobile website. From there, the app uses the device’s GPS to hone in on their gas station, though failing that users can also input the station number. After punching in their pump number, voila — their gas charges are sent to PayPal, and users get an email receipt.

Ready for the bummer? The pilot program is currently live at 50 gas stations in Massachusetts for now, though Cumberland Farms CIO Dave Banks hopes to get the company’s 600 stations across the East Coast and Florida tricked out in the future.

The app is novel and all, but what really gets me is the discount — the margins on fill-ups can be pretty thin, so it’s a bit of a surprise to see a company dip prices like that. If we dig a bit deeper though, the reasoning becomes a bit more clear — according to Innovation Economy, Cumberland Farms approached Boston-based startup Fig Card about integrating their mobile payment tech into local gas stations. Fig Card was subsequently snapped up by PayPal last April, and they’ve apparently being working on it since. As it turns out, PayPal is actually the one funding that nifty discount in order to drive awareness around the app, and Banks says it could potentially reach as high as $0.10 off per gallon.

Cumberland Farms isn’t the first company to try a mobile payments model — apparently, a chain of gas stations called Murphy’s started letting people pay for their gas via text message late last year. It worked, technically, but the onboarding process seemed like a real pain in the rear. PayPal and Cumberland Farms have touched on what seems like a pretty frictionless way to make this payment model work (and a way to incentivize it), now all we need is for every gas station in the country to start doing it.

eBay CEO John Donahoe announced this morning that David Marcus, the former CEO and founder of mobile payments startup Zong and PayPal Mobile VP, will be taking over as PayPal’s president. As you may know, former president Scott Thompson departed PayPal in January to be Yahoo’s CEO. Marcus joined PayPal last year when the payments giant acquired Zong for $240 million. Marcus stepping into the top spot at PayPal is not particularly surprising considering his extensive experience in the mobile and payments world, but it’s interesting that eBay chose a Silicon Valley startup entrepreneur (as opposed to an exec with large company experience) to lead its crown jewel.

We had a chance to chat with both Donahoe and Marcus about the next era of PayPal under Marcus’ leadership. Donahoe explains to us “David is the right guy for the right time at PayPal. PayPal is on the cusp of an enormous opportunity and David is a product visionary,” he says. “He knows how to create beautiful product experiences, and can match that with PayPal’s scale.”

Marcus is best described as a serial entrepreneur. He started his first company, GTN telecom, in 1996 in Geneva, Switzerland, which was acquired by World Access in 2000. That same year, he founded Echovox, a mobile media monetization company that helps large media companies connect with their mobile audiences. Zong, which was spun out of Echovox, offered a mobile payments platform that let you pay for items online via direct billing to your mobile phone. When PayPal acquired Zong last year, Marcus became VP of mobile for the eBay-owned company.

While at PayPal for the past seven months, Marcus spearheaded the creation, design and launch of PayPal Here, a Square-like mobile payments hardware and software platform for small businesses. He’s also worked on PayPal’s new Wallet product, set to debut later this year. And PayPal has also been hard at work on an in-store payments technology for big box retailers, which has been adopted nationally by Home Depot.

“David is going to focus on how to weave the consumer experience into these technologies,” Donahoe adds.

In his new role, Marcus says he will continue to use his past as an entrepreneur and product exec to bring a valuable consumer experience to PayPal’s mobile and web products.  ”We are going to spend time and focus on the product and consumer experience,”Marcus tells us. “We need to produce an amazing user experience for consumers in payments.”

Part of this will be focusing on innovating in mobile and adding new products to the lineup, he says. Last year, the company processed $4 billion in mobile payments transactions and expects $7 billion in mobile payment volume in 2012. He’s also betting on the soon to be launched digital wallet, which he explains will be able to add all forms of payments and stored value to a cloud-based wallet.

“I believe in one thing with payments—shopping is fun, payments are not,” he says. “We need to continue to innovate in mobile and web payments online and offline and remove friction wherever we can.”

Challenges are still aplenty for PayPal. Square, Google, and many well-funded startups like Jumio are vying for pieces of the payments pie both in terms of mobile and the web. But Marcus’s experience as a nimble entrepreneur is going to help the company continue to move fast, he says. He points to the fact this trend is already happening at PayPal with PayPal Here, which was built in 7 months. “The entrepreneurial spirit is strong at PayPal and the organization is nimble despite what people think.”

Besides working on product innovation around the consumer experience, Marcus is also making design a major focus. “Design is very important for everything going forward at PayPal and we are making sure to hire fantastic designers,” he says. “Beauty needs to be everywhere, even in a payments product.”

It’s worth noting that some were not impressed with PayPal Here’s design (a triangle dongle), while others seem to embrace the hardware’s aesthetic.

For PayPal Here specifically, the company is hard at work on expanding the mobile payments service for small businesses internationally. Marcus added that the merchant response to the launch of the product has been “tremendous.” And in its first day of availability, PayPal was seeing 1,000 new registrants per hour for the new service.

For PayPal, Marcus could be a breath of fresh ‘entrepreneurial’ air. Matrix Partners’ Dana Stalder, who was the former CTO of PayPal and was on Zong’s board of directors says that the appointment of Marcus is a sign that the company is looking to innovate in the next frontier of payments. “David is cut from the entrepreneurs’ cloth; he’s an incredible product person, has a deep passion for customer experience, and is not afraid of rolling up his sleeves,” Stalder says.

In the end, it’s clear that PayPal’s success in mobile payments and the digital wallet will come down to execution, customer experience, design and scale. Clearly, Marcus has his work cut out for him but considering his success as an entrepreneur so far, he may just be the man for the job.

After former president Scott Thompson departed for the CEO role at Yahoo, PayPal has named David Marcus, the former CEO and founder of mobile payments startup Zong and PayPal Mobile VP, as President (PayPal acquired Zong last year for $240 million). Ebay CEO and acting PayPal president John Donahoe posted the news this morning in a blog post.

From PayPal’s blog post: [Marcus is] going to lead PayPal with that “founder’s perspective,” to bring start-up energy to PayPal’s unmatched global reach and digital payment capabilities. With David at the helm, we will have an even deeper commitment at PayPal, and across eBay Inc., to be a leading technology-driven and customer-focused product innovation company. We’ll continue to focus on accelerating product innovation, driving consumer engagement and creating a world where paying anytime, anywhere and any way is synonymous with PayPal.

Marcus started his first company, GTN telecom, back in 1996 in Geneva, Switzerland, which was acquired by World Access in 2000. That same year, he founded Echovox, a mobile media monetization company that helps large media companies connect with their mobile audiences. Zong, which was spun out of Echovox, offered a mobile payments platform, that let you pay for items online via direct billing to your mobile phone. When PayPal acquired Zong last year, Marcus became VP of mobile for the payments giant.

Considering Marcus’s extensive experience in mobile, it’s clear the direction PayPal is going when it comes to the payments experience. Last year, the company processed $4 billion in mobile payments transactions and expects $7 billion in mobile payment volume in 2012. Marcus has been focusing his efforts of late on the launch of PayPal Here, a Square-like mobile payments hardware and software platform for small businesses.

PayPal has also been hard at work on an in-store payments technology for big box retailers, which has been adopted nationally by Home Depot.

You can see Marcus introducing PayPal Here in the video below.

Hot on the heels of the launch of its new Here mobile payment dongle in the U.S., PayPal is joining the ranks of companies looking to get a piece of the action in what will, this year, become the world’s largest smartphone market: China.

The company says it is “cautiously optimistic” that it will become the first non-Chinese company to get a license to process domestic electronic payments — both online and via mobile devices. This would be in addition to a business it already has in the country to process international payments.

According to a report in Bloomberg, eBay-owned PayPal’s SVP for Asia, Rupert Keeley, today said that the company would look to offering its new Here card-swiping dongle in China if it gets the license. The dongle, which would move PayPal into mobile wallet services where its platform could be used at points of sale, was officially unveiled yesterday and currently works with iPhone and Android handsets.

That gives Here a potentially good opening in China: IDC yesterday noted that China is due to overtake the U.S. as the world’s largest smartphone market.

And while the iPhone is seeing “off the charts” demand in the country, according to Apple CEO Tim Cook, the market is currently being dominated by sales of Android devices (including those running on forked versions of the OS). These sell for lower price points than the iPhone — currently under $200 and soon moving to be less than $50 per handset, according to IDC.

But it’s not just about point-of-sale opportunities, which is still a new area for PayPal. Most of its business today comes from straight e-commerce on the Internet and via apps. But here, too, the future seems increasingly mobile as far as China is concerned: research from OnDevice out this week found that some 38 percent of consumers in China are already accessing the Internet only via mobile devices.

The e-commerce market in China in 2011 was estimated to be worth $121 billion annually, according to Barclays Capital. At the moment, it is dominated by two local players: the Alipay offering from e-commerce and Internet giant Alibaba has a 47 percent share of the market and rival Tencent’s Tenpay has 21 percent, says Analysys International.

PayPal today unveiled its new global payment platform for small and medium-sized businesses, PayPal Here. It brings the veteran payments solution into local stores with a new mobile app-card reader solution to rival Square. Rolling out to merchants today, it features a triangular card-reader, or dongle, that merchants can use to swipe cards of all varieties to start accepting mobile payments on-the-go — but all users need is their phones, via a startup named Card.io.

The startup, which unveiled its own consumer-facing app back in January, allows merchants to make the payment process as frictionless as possible. Available for both iPhone and Android, it provides mobile app developers a way to let consumers make purchases simply by holding the credit card up to the phone’s camera. As the company announced today on its blog, its new partnership with PayPal allows merchants to accept credit cards without readers or extra hardware: “Merchants can immediately begin accepting credit cards with nothing but a phone … We’re excited to be working with PayPal and we hope that this partnership will improve mobile commerce for both consumers and merchants.”

Check out Card.io’s blog post here.

We’re at the PayPal event in San Francisco today where the ePayments giant has officially pulled back the curtain on its payment solution for small businesses. The news has been trickling out over the last few weeks now, as Leena reported last week on the fact that the company was prepping for the launch of an in-store payments system focused on smaller merchants. And that they have, with PayPal Here. While it remained unclear what exactly the technology was going to look like, today it’s become fully apparent that PayPal (even if not explicitly) is taking dead aim at Square.

And for good reason, Jack Dorsey’s mobile payment solution has been blowing up of late, but PayPal thinks it is going to have a leg-up on the competition due to its history and experience in the payment space. After 14 years and having attracted over 100 million customers, operating in more than 190 countries, PayPal has a sizable network. It also helps that PayPal’s new global payments solution is nearly universal in the type of payments it accepts.

But PayPal’s new in-store dongle is literally the triangle to Square’s, well, Square. Just like the rest, the triangular add-on just plugs into the headphone jack on your smartphone. Merchants can then accept payments by swiping cards with the thumb-sized card reader, or — and this is a highlight — simply use the smartphone’s camera to scan credit cards (powered by Card.io), scan checks, etc. This saves merchants from having to type in credit card numbers at the point of sale. They can just invoice directly from the mobile app, or, naturally, accept PayPal. It even has “a little wing” that pulls down right over the top to stabilize the card reader as merchants swipe.

Merchants who apply will be given a business debit card, too, to access their funds, with 1 percent cash back on all eligible purchases. PayPal Here offers a flat rate of 2.7 percent for card swipes, and although media has focused on that high percentage, PayPal is quick to point out that, with the 1 percent cash back, total fees are decreased to 1.7 percent.

The last part of this is that PayPal has today released an update to its iPhone app, its popular consumer app with the “Local” feature that allows consumers to use geo-location to find the merchants that accept PayPal in their local area. With this new update, consumers can open the app, tell the merchant they’re in store and ready to pay, and the merchant can then just find their picture, name and information, which is already in PayPal’s system, and voila, no wallet or card needed. Yes, it works just like Square’s Card Case, which was introduced last year.

This has the potential to be a really powerful complement to PayPal Here, essentially allowing PayPal to bypass NFC or QR codes or any other form of mobile payment tech, simply with the geolocation features of customer smartphones and their massive network. This especially true considering that PayPal Vice President of Mobile Dave Marcus said today that it’s going to be pushing it’s consumer iPhone app “really hard” to its existing customers. If they can up the adoption of this app, it’s going to make payments even easier for small merchants.

Today, PayPal is going to be shipping PayPal Here to a few thousand merchants, with full-scale roll-out coming in the next few months. PayPal believes this can be a “game changer,” words that were repeated today during its presentation. With quick-pay, 24/7 support, PCI compliance — a lot of this stuff has been in PayPal’s wheelhouse for years now. It was only a matter of time before PayPal got into the small business game, and now they’re trying to do so with a bang.

This just in… As we reported it would do yesterday, PayPal has today issued a significant update to its acceptable use policy regarding payments for certain erotica-themed e-books.

Now the eBay-owned payments company says that it will only prohibit using its payment system for specific books — not entire classes of books — and that it will only apply to those publications that contain pictures as well as words, and in that case only instances where those images are obscene as defined by the U.S. legal system.

This is a big reversal from the company’s policy as it set out last month, when it wrote to several e-book distributors mandating that they remove erotica covering rape, incest and bestiality from their catalogs, or face being barred from using PayPal to process orders and other transactions related to the sale of those books.

PayPal in its blog post also notes that instead of instant cancellations, it will work with publishers to resolve the situation when violations of the policy are thought to have occurred.

“Instead of demanding that e-book publishers remove all books in a category, we will provide notice to the seller of the specific e-books, if any, that we believe violate our policy,” he notes. “We are working with e-book publishers on a process that will provide any affected site operator or author the opportunity to respond to and challenge a notice that an e-book violates the policy.” It says it has not shut down any accounts of e-book publishers as a result of this situation.

The news may come as vindication (and victory) to organizations like the Electronic Frontier Foundation, e-book distributors like Smashwords and the dozens of authors and others who vocally disagreed with the company for taking its original stance.

(Although  there will likely still be people who will claim that PayPal’s revised policy does not go far enough and that it should not be involved at all in making any decisions on the content of what gets sold via its payment systems.)

Mark Coker, the CEO of Smashwords, was the person who originally made public PayPal’s policy on erotica when it was first issued in February. (We were one of the first outlets, apparently, who picked up the news, he says. That story is here.)

In an email he sent out to authors and publishers who work with Smashwords alerting them to the changes just moments ago, he notes that his company is now rolling back their policy to pre-February 24 terms (in other words, how it had been before PayPal’s mandate). He also sums up the meaning of this event quite well:

“This is a big, bold move by PayPal.  It represents a watershed decision that protects the rights of writers to write, publish and distribute legal fiction.  It also protects the rights of readers to purchase and enjoy all fiction in the privacy of their own imagination. It clarifies and rationalizes the role of financial services providers and pulls them out of the business of censoring legal fiction.”

A development in the ongoing story about PayPal and requirements it made on e-book distributors to remove certain kinds of erotica from their catalogs: there are signs the eBay-owned company could be preparing to reverse its position as early as this week, according to the Electronic Frontier Foundation.

The digital rights group has been among those meeting with the payments company in recent weeks, as part of a process to get PayPal to reconsider its decision. The last meeting between the EFF and PayPal was on Friday, and its activism director, Rainey Reitman, told TechCrunch that she left with a “good feeling,” with PayPal’s general counsel indicating that they would be “discussing it internally and might even be able to make a public statement in the next week.”

The EFF, she notes, specifically has requested that PayPal “update their policy so that this type of legal fiction would not be affected.”

The news — or potential news — caps off a tumultuous few weeks for the payments company over its role in deciding what content is appropriate or not to sell via its payment system.

The story started in February, when PayPal issued a mandate to e-book distributors requiring them to remove from their catalogs erotica that contained references to bestiality, rape and incest — or else face a ban on doing business with PayPal. (I wrote about it early on here.)

Mark Coker, owner of one of the sites affected, Smashwords, disagreed with the mandate but also noted that his hands were tied with complying:

“It is with some reluctance that I have made the decision to prohibit incest-themed erotica at Smashwords,” he wrote at the time in an open letter to Smashwords’ partners.

That’s because PayPal plays such a big role in how the company is run: it’s used not only for book purchases, but it’s also how he pays authors, Coker told me today.

Coker also told me that in fact less than one percent, 1,000 books, of his company’s catalog were affected, but that such mandates on what is essentially legal fiction (even it’s not your own cup of tea) is a “slippery slope.”

And it turned out that the issue became a slippery slope in itself, with the news then getting picked up by Reuters, Forbes and a number of other blogs. The EFF, meanwhile, launched a letter-writing service to protest what it described as “holding free speech hostage by clamping down on sales of certain types of erotica.”

The PR situation was not helped last week, when it emerged that PayPal was partly laying the blame at the credit card companies. But at least one, Visa, washed its hands of that: “Visa had no involvement with PayPal’s conclusion on this issue,” it told Madeline Morris at the Banned Writers blog.

With public reaction to the mandate mounting, PayPal approached Coker and others like the EFF to discuss ways of working through the issue.

To be fair, PayPal has since also tried to make further clarifications itself: “PayPal does allow its service to be used for the sale of erotic books. PayPal is a strong and consistent supporter of openness on the Internet, freedom of expression, independent publishing and eBook marketplaces,” its head of communications, Anuj Nayar, wrote on the company’s blog. “But we draw the line at certain adult content that is extreme or potentially illegal.” It then specified that certain erotica with pictures might fall on the wrong side of that line.

Complicated and confusing? Yes. And as Coker notes, partial concessions will likely only more questions now and in the future. “If they don’t go all the way [and reverse this mandate] this issue will just get reopened,” he told me today.

Now, it appears, PayPal may be thinking along those lines, too.

We have reached out to PayPal and will update this story as we learn more.

[image: SiGMan, Flickr]

We’ve been hearing recently about PayPal’s in-store payments platform for large retailers (which will soon be rolled out to small businesses as well). But we haven’t seen PayPal do much in the past few months with its plans for its digital wallet on the consumer side. We know PayPal has a major vision for how payments will be made in the future, but today, the company is giving us a glimpse of exactly what new features will be added to the platform in the coming year.

As PayPal’s director of communications Anuj Nayar tells us in an interview, “PayPal is changing, and this is the first major revamp of the core PayPal product. We’re known as an online payments brand but this is all part of PayPal becoming an actual wallet.”

Sam Shrauger, Vice President of Global Product and Experience for PayPal, says that the “new PayPal” will “let consumers do things with their money that have never been possible before.” One of these features is the ability to have flexibility with how you want to pay for an item in a store. So let’s say you purchase a computer from a store or online with your Starwood credit card but realize that you actually have a Best Buy credit that you wanted to use.

With the new digital wallet, you can buy something in a store, take it home and decide later how you want to pay for it. PayPal will offer a five to seven-day grace period for consumers to change their minds. So you can switch from one funding source to another, decide to pay over time in installments and even apply different sources of value (gift cards, airline miles, loyalty points, etc.) to a payment.

As we heard from PayPal over the holidays, data is going to be a huge part of the payments company’s product strategy over time. The new version of PayPal will allow you to create personal lists of items you want. Via PayPal, you can search for items, compare prices and create lists of things you want to buy for a variety of situations. PayPal will then find deals and coupons for these items on your list whether you are in the store or online.

Additionally, you’ll be able to create spending rules that tie specific cards and payment instruments to specific merchants. So you can create specific “set asides” like travel funds and set rules by purchase amount. For example, you can earmark a bank account for all grocery store purchases, and a specific credit card for entertainment and travel directly from PayPal. All you’ll need to do is pay via PayPal, and the platform will automatically recognize whether a specific payment should be drawn from a credit card or bank account.

As Shrauger writes in a post announcing these new features, “PayPal is not about replacing a card swipe with a phone tap at point of sale. We are reimagining money to free it in its digital form so that it can work better for everyone. These features and examples are only the beginning: moving forward, we’re only limited by our ability to imagine what’s possible.”

Nayar explains that there will be “an avalanche” of product announcements that will bring these features to life in the coming year, starting in late May. “This will be your new PayPal account,” he says.

This new wallet will also be able to be used with the new in-store experience at retailers (and perhaps at small businesses as well). PayPal clearly wants to become the digital wallet provider for consumers, but the company already has a number of competitors vying for this spot. Google seems to also have major ambitions to dominate in this space with Google Wallet. We’re seeing other competitors enter the space, especially in mobile. And we still don’t what Apple’s intentions are when it comes to the wallet.

But there are a few things in PayPal’s favor. First, the company already has an established user base of over 100 million active users. Second, PayPal is device-agnostic and can be layered over the web, mobile, and other platforms. The company hasn’t revealed any new mobile plans today, but that’s also sure to be a significant component of the digital wallet’s technology.

In addition to partnering with large retailers, it looks like PayPal is going to be launching a set of payments offerings for small businesses as well. We just received an invitation for an event PayPal is hosting next week, which will unveil what the payments company has in store for a solution for small businesses.

We’ve heard that similar to PayPal’s recently introduced in-store payments technology for big box retailers, the company is going to be launching an in-store payments system focused on smaller merchants. It’s unclear what this technology will look like, but we’ll find out more next Thursday.

It’s not surprising that PayPal is going after small businesses with an in-store solution. There’s a huge market in providing a payments platform for merchants, as evidenced by the growth and success of Square.

It should be interesting to see how similar PayPal’s small business solution is to its in-store platform designed for Home Depot, which is being rolled out nationally. With the Home Depot system, PayPal users are able to pay for items via their PayPal account at Home Depot’s point of sale systems. They can either use a PIN code via their mobile phone or a specialized PayPal credit card that can be swiped, the payment amount will be deducted from their PayPal account.

PayPal previously tried a test of using the online payments platform at small businesses back in 2009. The company launched a new version of its popular iPhone app that allowed users to find businesses near their immediate location that accept PayPal as a form of payment. The feature rolled out in San Francisco initially, but the initiative never really took off.

We’ll keep you updated on what PayPal has up its sleeve next week.

The independent book world has been beset on all sides recently. When the first e-publishers began to go to bat for independent and self-published authors, the writing world rejoiced. For too long the rapacious vanity press had taken their money and offered little in return. There is very little up-front investment for self-published authors except for a good story and a little HTML gumption and Amazon, PayPal, and Barnes & Noble (and Apple) made it easy to publish anything, any time. The market was the critic and the writer reveled in the spoils. Then things changed.

Most recently Seth Godin bumped up against Apple’s publishing guidelines when he added links to Amazon books that Apple does not sell inside his self-published e-book. There can be arguments on either side for Godin’s position that the contents of his books are his and his alone to control. However, another brewing scandal points to outright censorship. Ingrid wrote about it here but given the problems now arising with various epublishers, I thought it would be good to recap.

Following Amazon’s refusal to sell incest fiction (I’m not defending it, I’m saying it exists and given the predominance of that particular genre of staged oldster-on-teen porno on the Internet I suspect more people enjoy it than would care to admit), PayPal has decided to stop allowing its customers to pay for “erotica” through its site entirely. BookStrand, for example, posted this notice:

The delightfully Orwellian “unpublish” aside, it’s clear that PayPal thinks it can police the Internet. It cannot.

As TheSelfPublishingRevolution notes, this is a bit more far-reaching than Amazon’s initial admonition. Again, we’re talking about a few relative outliers in the erotica spectrum, but presumably zombie-on-zombie, furry, and centaur son-and-mother erotica would be caught up in this dragnet. More importantly, PayPal is the everyman’s go-to choice for cash collection and they are not a publisher. Many credit card companies, for example, pay lip service to not accepting accounts from adult shops and strip clubs but boy do they enjoy the high ATM and credit fees when they do.

Another writer, Excessica [NSFW], received a call from PayPal. They said she was in violation for selling psuedo-incest books and when she followed up it was discovered that PayPal would also consider BDSM in violation. When asked about this, they clammed up. As it stands, then, PayPal doesn’t want any e-rotica to change hands. Merchants cannot sell books dealing with an obvious taboo (Woody Allen-style or non-Woody Allen style) nor can they make a lateral move into bondage.

At this point, PayPal is simply censoring content that it worries will get it into trouble. With all the Elmer Gantry-ism floating in the eddies of American life, everything looks like a potential source of pain. Were the conservative or religious to attack PayPal on the smut front, presumably, the effects on PayPal’s core business – people selling stuff to each other through eBay and, to a lesser extent, e-commerce sites – would be devastating, especially with competitors like Square coming in close behind. I find PayPal to be a sclerotic boil on the face of worldwide e-commerce, and were the heartland to feel the same way, you could envision a combined boycott of all PayPal.

To head this off, then, they attack writers who are, at worst, helping people get their rocks off in a safe, private way. Fiction harms no one and enriches many. It offers a welcome release in any form. What harm does it do? Where does this censorship stop? Can PayPal ban The Road for its mention of cannibalism? Houellebecq for his randy writing? At what point does the excuse “They don’t have to sell with us, and we don’t want them,” come back to bite these companies? And at what point do we luxuriate in sweet schadenfreude when these companies face far worse enemies – the erosion of trust, boycotts, and the like – than some folks who write dirty little books?

Back in July, PayPal shelled out over $200 million for payments platform Zong, as a way to boost mobile payments technology. As you may know, Zong lets you pay for things, particularly virtual goods online, via direct billing to your mobile phone. According to an announcement made by eBay today, PayPal is looking to make these mobile carrier payments more available for online merchants.

According to a blog post from Zong founder and PayPal Mobile VP David Marcus, PayPal is launching an initiative to help increase the usage of carrier payments. One of the main barriers to carrier payments are lofty carrier rates. Wireless carriers have charged roughly 30-40 percent to process transactions made via mobile phone accounts, making it very difficult for mobile payment companies like Zong and competitor Boku to scale beyond virtual goods.

These transaction costs are passed down to developers and merchants using the mobile billing technology, which are then passed to the consumer. Carriers also sometimes have a dollar amount limit on payments that can be processed over a specific period of time, which inhibits merchants from using this payments option for larger transactions. In order to avoid these costs, mobile payments companies need to negotiate direct relationships with carriers.

PayPal says that the initiative will require that carriers “revise standards to help optimize user experience, increase flexibility of carrier payments as a payment method, and increase payout rates for merchants.” PayPal adds it will be working directly with carriers to help make lower transaction costs a reality. In turn for lowering fees, carriers will be able to leverage some of PayPal’s own mobile payments expertise and network of users.

It’s hard to tell whether PayPal is making real headway in cutting transaction costs without actual evidence of deals where carriers have actually lowered their cut. Hopefully, we’ll see more deals being struck in the future. Until then, this is still just an ‘initiative.’

Adult content has long been a big draw, and one of the most profitable, in the world of digital media, but a recent move by PayPal is a sign of how one part of that business may be facing some problems up ahead.

Smashwords, an e-book distributor that competes with Amazon, has sent out a letter to the authors, publishers and literary agents that it works with to tell them that PayPal is requiring Smashwords to remove all erotica content on its platform that contains references to bestiality, rape and incest – otherwise it will stop doing business with Smashwords altogether. The changes are due to take effect on Tuesday, Feb. 28.

Regardless of whether you are a reader of such material or not, the move by PayPal raises questions of whether a middle-man payments company should be calling these kinds of shots over content, which some might even go so far as to call censorship – and also of the power of those payments companies when they decide to do so.

The letter – written by Mark Coker, founder of Smashwords – has been posted on Smashwords’ own site, and gives a fuller explanation of what is going on: it all stems from an “ultimatum” that PayPal issued to Smashwords on Feb. 18: “PayPal gave us only a few days to achieve compliance otherwise they threatened to deactivate our PayPal services.”

Coker says that other e-book retailers have also been served with the same orders, but he does not name them. He also says that PayPal has been helpful with working out exactly what kind of content falls foul of the new rules, but that “gray areas remain.” (For example incest also includes “pseudo-incest.”) One other area that PayPal named, related to underage children, is already prohibited on Smashwords, Coker notes.

He also points out that this latest order is part of a bigger push by PayPal to start “aggressively enforcing a prohibition against online retailers selling certain types of ‘obscene’ content.”

It’s not a decision that Coker and Smashwords – or perhaps other platforms – are taking lightly. “It is with some reluctance that I have made the decision to prohibit incest-themed erotica at Smashwords,” he writes of that particular new no-no.

“Regardless of your opinion on incest, it’s a slippery slope when we allow others to control what we think and write. Fiction is fantasy… A reader should have the right to feel moved however they desire to be moved,” he writes. “We do not want to see PayPal clamp down further against erotica. We think our authors should be allowed to publish erotica.  Erotica, despite the attacks it faces from moralists, is a category worthy of protection.”

But Coker is realistic, too, about the power that PayPal wields at Smashwords — and by extension the role it likely plays elsewhere, too:

“You might wonder if Smashwords should simply switch to a different payment provider.  It’s not so easy.  PayPal is designed into the wiring of the Smashwords platform.  They run the credit card processing for our retail store, and they’re how we pay our authors and publishers.  PayPal is also an extremely popular, trusted payment option for our customers.  It is not feasible for us to simply switch to another provider, should such a suitable provider even exist, especially with so few days notice.”

We have contacted PayPal for comment and would like to hear from other publishers who may be affected by these changes.

(Photo: TimoOK, Flickr)

PayPal recently revealed that it was testing an in-store payments technology both via mobile and point of sale systems on a ‘friends and family’ basis at Home Depot. Initially, the pilot was only for 5 stores. Today, on eBay’s earnings call eBay President and CEO (and interim PayPal president) John Donahoe revealed that PayPal will be extending the pilot to 51 Home Depot stores in the San Francisco Bay Area.

Basically, via the pilot customers (for now, this only applies to PayPal employees) are able to pay for items via their PayPal account at Home Depot’s point of sale systems. They can either use a pin code via their mobile phone or a specialized PayPal credit card that can be swiped, the payment amount will be deducted from their PayPal account.

The bigger vision of brick and mortar partnerships are set to include location-based offers, making payments accessible from any device and offering more payments flexibility to customers after they’ve checked out. Users will also have the ability to access realtime store inventory, receive in-store offers, and real-time location-based advertising from stores. PayPal will also help retailers use location and transaction data to improve the experience for consumers.

As PayPal’s Anuj Nayar told us recently,  the Home Depot test program was individually established between PayPal and the big-box retailer, but in the future, PayPal is partnering with point-of-sale software companies to help expand the in-store program to other brick and mortar retailers.

The assumption is that the results of the smaller test at Home Depot, which only launched a few weeks ago, must have been positive, so Home Depot is expanding the pilot program. We’re told that PayPal will be partnering with at least 20 other known top-tier retailers for the in-store payments test, which will be unveiled later this year.

When asked about the impact of PayPal point of sale integrations will have this year, Donahoe says the last year was about the planning process, this year will be getting the in-store integrations rolled out and next year will be about sale. “The goal is to get a product that will be expanded to every vertical around the world so we can build a business around the point of sale product.”

Donahoe said he tried actually the in-store integration this morning at a Home Depot in San Jose (he says he left his wallet and mobile phone in the car), and just was able to enter his mobile number and pin and was able to pay. The receipt was emailed to him.

At his CES keynote yesterday evening, eBay CEO (and new interim PayPal CEO) John Donahoe revealed a number of new mobile payments forecasts for both eBay and PayPal. As we heard from PayPal VP David Marcus a few days ago, PayPal surpassed its expectation of $3.5 billion in mobile payments in 2011, reaching $4 billion for the year. Donahoe said in his keynote that eBay reached $5 billion in mobile GMV (gross merchandise volume) in 2011, doubling 2010′s GMV.

He also projected yesterday that eBay would reach $8 billion in mobile GMV in 2012, and PayPal will reach $7 billion in transactions in 2012. eBay Mobile currently has more than 65 million downloads of eBay’s mobile applications across platforms. And more than 890,000 new eBay shoppers made their first eBay purchase through the company’s mobile apps in 2011, a 113% increase year over year.

Donahoe also announced a new strategic partner in eBay’s RedLaser barcode scanning app—Best Buy. The app was updated last fall to include integration from PayPal and Milo to give users the ability to buy now for either in-store pick-up or home delivery later. Yesterday, Best Buy was revealed at as RedLaser’s newest partner (joining Toys R Us).