Paypal buys the Cardio credit card scanning service
Payment processor Paypal has bought the creator of a product that triggers cash transfers when a user flashes a credit card in front of their phone.
The firm had previously paid a fee to use Cardio's innovation.
The acquisition follows Paypal's purchase of another smartphone-based payment service, Zong, last year.
The moves may help it tackle the challenge posed by the introduction of near field communication (NFC) payment technology to smartphones.
"We first met with the team at Cardio when we were working on integrating their technology into the Paypal Here mobile app," said Hill Ferguson, Paypal's vice president of global product, on the firm's blog .
"[They will] help us create new experiences to make it even easier for consumers and merchants to use the Paypal digital wallet. The current Cardio technology will remain available to developers for use in their own applications."
Cardio allows users to make payments by "scanning" the front of their credit card using the camera on an Android or Apple iOS device.
The software saves the time involved in typing in the details.
The San Francisco-based business offered its service to consumers for 15 cents (10p) a scan, and charged other companies a fee to integrate the function into their apps.
Paypal started using the service in March when it launched Here - a product allowing businesses to accept customers' credit-card payments via smartphones as an alternative to installing a cash-register system.
The effort was designed to compete with an existing service from Square.
But PayPal faces a wider challenge from the introduction of NFC chips into recent smartphones. The technology allows the devices to be used as an alternative to credit cards or cash - payments are prompted by the user placing their mobile in front of a reader.
The research agency Forrester says NFC has only had a limited impact to date as retailers have been put off by the cost of the equipment and the prospect of having to pay a new fee to banks and credit card companies that handle the transactions.
"Paypal has realised that you don't have to have contactless NFC technology to make a mobile payment in a store," Forrester's research director Benjamin Ensor told the BBC.
"It is betting that the retailers can integrate online payments into their shops using the same system that many already use to run their websites - that can be easier and cheaper for stores to do than installing NFC readers."