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To enhance its mobile payment platform, e-commerce service provider, eBay Inc. (EBAY - Analyst Report), has unveiled a hands-free payment system, Beacon, enabling consumers to make retail in-store payments without using their phone.

Beacon is a small-size hardware device which can easily be inserted into a wall socket at brick-and-mortar stores. The device uses Bluetooth technology to transmit data and facilitate payments.

With this payment system, all PayPal app customers will be able to shop at Beacon-enabled stores without any credit card or even without actively using their phones. On entering the store, a customer’s phone will make a sound to confirm that it has checked in successfully, which will be picked up by the device at the store.

It appears that the new payment device will also be able to read purchase information on the Paypal compatible point-of-sale (PoS) system at the store, connecting with the payment information on the user’s phone and thereby completing the transaction. eBay has promised that customers’ location will not be tracked as they shop and check-in will also depend on the customer.

PayPal, which accounts for almost half of eBay's annual revenues is expanding beyond its online payments service and finding new ways to get a foothold in the offline world. We believe that this new system will greatly accelerate PayPal’s in-store payment efforts, placing PayPal in a better competitive position against rival mobile payment systems such as Google (GOOG) Wallet, Isis, Square and others.

Today, the biggest driver of growth in the industry is the adoption of smartphones, tablets and other mobile Internet devices. Consumers prefer mobile browsers for shopping, search and entertainment, and apps for navigation and acquiring information. They have shown a strong desire to order and pay online to avoid hassles associated with shopping at brick-and-mortar stores.

In order to benefit from this change, eBay is taking all the necessary measures for continued growth in the mobile payment business. The company continuously introduces new solutions to enhance the mobile shopping experience and rapid consumer adoption makes this a huge growth opportunity. In 2013, the company expects to generate $20 billion of mobile commerce and payments volume.

Though eBay’s e-commerce business shows great promise, competition may be expected to pick up as banks and other companies announce their own payment systems and Google’ digital wallet gathers steam.

Currently, eBay’s shares carry a Zacks Rank #3 (Hold). Other stocks that are performing well and are worth considering include SanDisk (SNDK) and Geeknet, Inc. (GKNT), bothcarrying a Zacks Rank #1 (Strong Buy).

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