A Canadian software provider is the first of many middleware companies that PayPal Inc. says will be key to bringing its online payment system to the physical point of sale.

AJB Software Design Inc. of Mississauga, Ontario, is supporting PayPal acceptance in its software, which merchants use to manage payments at the register and route them to a payment processor. Some 110 U.S. retailers that each has 100 to 5,000 stores use AJB's software.

PayPal already is moving to allow consumers to use its payment system in physical stores in place of banks’ credit or debit card, though PayPal transactions may draw from card accounts. They also may draw payments from checking accounts through the automated clearinghouse system, or from funds leftover in PayPal accounts.

The San Jose, Calif.-based unit of eBay Inc. disclosed last week that it is testing point-of-sale payments with 20 retailers, including Home Depot, where PayPal is accepted in five stores (see story).  Home Depot is not an AJB client.

In that trial, the software allows shoppers to spend from their PayPal balances by typing in a phone number and PIN. No card or app is required, though users also may swipe their PayPal card (see story).

AJB started working with PayPal about two months ago, largely because of customer demand. Five of AJB's major customers contacted it over the course of just two weeks, requesting PayPal acceptance at the point of sale, says Pat Polillo, AJB vice president of sales.

"It wasn't too long after that, that I got a call from somebody at PayPal," he says. "They said: 'Hey, look, we have been out there talking to retailers, and a lot of times your name comes up.'"

AJB's first customer to deploy the PayPal add-on will do so by the second quarter, Polillo says. He declined to name the customer.

Retailers still need a separate agreement with PayPal, though AJB's software makes PayPal integration akin to flipping a switch once that agreement is in place.

Besides AJB, "we are going to be signing deals to work with some of these leading middleware companies to connect our systems to their systems to allow merchants to roll this out at stores," says Anuj Nayar, a PayPal spokesperson.

PayPal also is working with terminal makers. It collaborated with VeriFone Systems Inc. last year on a trial of mobile payments at the point of sale (see story). VeriFone also allows users of its mobile card-acceptance device, PayWare Mobile, to transfer funds from a PayPal account by bumping phones together.

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