PayPal is testing mobile payment service at 30 McDonald's restaurants in France. This testing will heat up the battle in the mobile payment arena with start-up Square Inc. recently announcing its mobile payment service partnership with Starbucks.

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As usage of smartphone to make payments in shops and restaurants by consumers sees a steady increase, PayPal is upping the ante by offering mobile payments service. PayPal, owned by eBay Inc, has partnered with more than 15 retailers to accept PayPal payments in their stores. The latest to join the PayPal bandwagon is popular fast food chain McDonald's.

A partner like McDonald's "would certainly be a whale" and would make a major difference to PayPal's reach. "If McDonald's customers can stand in line and order on a mobile app and pay with PayPal that is a huge extension of PayPal's reach," said Gil Luria, an analyst at Wedbush Securities.

The test in France enables McDonald's customers to place an order either through smartphones or online via a McDonald's mobile app and customers can make payments using PayPal's services. A systematic service like this may help McDonald's to cut down on the long queues at its restaurants and save precious time. "If they can shave 10 seconds off wait times, same-store sales could go up a lot," asserted Luria.

Earlier in February this year, reports indicated that PayPal was discarding NFC technology in favor of its own payment software. It was also considering building a mini "Shoppers Showcase" to display its technology to prospective retail partners.

The PayPal software enables users to conduct a transaction without relying on NFC chips. Instead, the company connects a users' PayPal account to his/her mobile phone number and a PIN code. The technology can be used to make payments at any participating retailer. All a user needs to do is choose the PayPal option, enter the linked phone number, and key in the PIN. Moreover, the PayPal technology negates the need for a credit card swipe or even physically taking out the mobile device. Users also receive an electronic receipt as proof of transaction.

With technology playing an indispensable role in our day-to-day lives, the PayPal-powered mobile payments would make for a quicker and happier 'Happy Meal' in the near future.

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