PayPal is taking a new route to get your money, it's taking its wallet offline.

PayPal Wallet to Replace Credit Cards

PayPal eventually wants to replace using cash and credit cards at the checkout counter by issuing a payment card of its own. Dubbed PayPal Wallet, the system will involve the use of cards to swipe when paying for merchandise, but the difference here is you're not limited to paying from one source. PayPal Wallet is like an actual wallet where you can choose from among different funding sources, such as gift cards, different credit cards or your PayPal cash balance.

With PayPal Wallet, account holders can now use their money (or associated cards) to pay at brick-and-mortar establishments without having to worry about being online or owning an NFC-enabled mobile device, like with other mobile wallet systems.

PayPal senior director of customer experience, Laura Chambers, says this will be game-changing, since "[i]t’s no longer going to be about online or offline commerce, ecommerce, m-commerce. It’s just going to be about commerce."

No Phone? No Problem!

PayPal wants to solve the problems associated with maintaining a hardware-specific mobile wallet, such as Google's own Wallet system, which requires an NFC-enabled Android smartphone, a smartphone that is limited to a couple of flagship handset models. Because PayPal Wallet will use the same card-swiping system that establishments already accept, support for the system will only require a software upgrade from the merchant's end and not a costly hardware upgrade for supporting NFC-based tap-to-pay services.

Learning Opportunities

PayPal has also made an ingenious workaround to the disadvantage of swiping a payment card. NFC-based tap-to-pay services let a user choose their funding source right on their smartphone before the actual payment. But with PayPal Wallet, a user can pay now and adjust the payment source later. If, for example, your default payment method is through your Visa card, you can still change your payment source when you log in using your computer back at home.

Location-Aware Promos

PayPal's parent company eBay acquired Where last April, which owns a "geofencing" technology that enables PayPal's new wallet system to alert customers for interesting deals and discounts at establishments within the vicinity. Users can opt-in to get push notifications when their favorite establishments or product niches have promotions. The app also works as a loyalty card, which lets customers rack up points whenever they make a purchase using the PayPal wallet.

With its upcoming Wallet product, PayPal is challenging not only other mobile wallet providers, but also group-discount companies and check-in based social networks. PayPal is set to roll out its new Wallet within the next 12 months. Will PayPal make it big in the offline world as it has with its online products?