Mobile payment systems have yet to take off to the degree that players in the field, including PayPal, had hoped. The peer-to-peer (P2P) aspect of payments has done better, led by PayPal's own Venmo, but paying businesses for goods and services using a mobile device has been slow to gain traction in the US. That's part of what makes the PayPal mobile app so lackluster as a mobile finance app. There's little you can do with it, because few businesses accept it. As a Web service, PayPal is still valuable for processing online payments because it provides an extra layer of protection between you and the other party, but the app rarely comes in handy. Furthermore, its security features are weak. Stick with Editors' Choice Venmo for your P2P mobile transactions. As for in-store cashless payments, the only real contenders are Apple Pay and Google Wallet, and even those are limited. (Note that there's also an Android version of PayPal, which suffers from many of the same problems, and I'll be rereviewing it soon.)
Functionality
The PayPal iPhone app does have a cashless, in-store purchasing function, and I like the system it uses. Instead of relying on near field communication (NFC), the way Google Wallet does, PayPal uses location. That means you don't have to have a special device for it to work. You just have to have location services enabled and be near enough to the seller for your payment to be verified.
As I mentioned, however, not a lot of brick-and-mortar stores accept PayPal. You can see which merchants within your area accept it by using a geolocation feature in the app. Even in New York City, retailers were few and far between when I tested it. Usually, in reviewing mobile payment apps, I add a disclaimer that New York surely has greater support for such a service than you're likely to find in more suburban or rural areas. With PayPal, the selection is so limited that a disclaimer isn't warranted. A lot of the vendors looked like micro businesses, such as lone lawyers, whose "location varies." So it's not as if you can pop out to the coffee shop and grab a latte using PayPal.
If you manage to find a business that accepts PayPal, paying for a purchase works similarly to the way Square Wallet worked before Square killed it off. You find the business in the app, slide a toggle on screen to allow the merchant to see your username, and then tell the cashier that username. The cashier then chooses your username from an available list and charges your account.
The other major function of the PayPal mobile app is managing P2P payments. Moving money between friends is easy and straightforward. As long as you have the person's email address associated with his or her PayPal account, you can initiate a transfer in a few taps. But there is room for error. For example, a few months ago a friend tried to give me money through PayPal for the first time, and he mistyped my email address. By the time we figured it out, which was only an hour or so later, there was no way to undo the transaction. He had to email the stranger and beg the person to return the payment.
You can cut down on errors of this kind if the person you owe money sends an official request or uses PayPal.me. With this new feature, each user can create a unique URL to use for requesting payments. If you go to paypal.me/jilleduffy, for example, you can send me some moola without ever having to know my email address, much less type it correctly.
If your friends prefer Venmo, of course, PayPal won't do you much good. Venmo works similarly, but it has a few more features, including a social stream that lets you see payments people have made to one another. That's the one thing about Venmo I personally dislike. I've enabled all possible privacy settings to avoid letting my debts be known.
Security
One of PayPal's greatest strengths—as a service—is its PayPal Purchase Protection policy. That's the company's nearly ironclad guarantee that you will either receive the goods and services you bought or get your money back. This adds a layer of protection between your credit card and the vendor. When you buy something with PayPal, even if the purchase price is ultimately going to your credit card, the vendor never gets your credit card details. It's a smart solution to many of the problems with online shopping and potential fraud. It's aces.
At the app level, PayPal's security is better than it once was, but still not great. The app doesn't automatically log you out when you navigate away from the screen or when your phone locks from being idle, the way Mint does. With Mint, a perpetrator still couldn't do anything with your money from that app. With PayPal, your money is a sitting duck. I was able to navigate away from the app, return to it, and both request and send money without ever being asked for a password or PIN! Any time you can move money using an app, that app needs very strong security features. Again and again during testing, I'd pick up my phone and realize I could get back into the app without any hindrance. If I let it sit idle for several minutes, it would log me out. But for shorter periods of time, I was unencumbered.
There is a Remember Me option in the Settings that, when enabled, lets you see your photo, payment preferences, and saved offers without having to log in, but even when this setting was switched off, I could flip to another app for a little while and return to PayPal without being prompted for any sign-in information whatsoever. That's not good. You should be asked for a password or PIN anytime you leave the app.
There's also an optional six-digit PIN feature in the settings, and when I enabled it, I was completely baffled by the fact that the app didn't then ask me to set a PIN. I logged out to see what would happen. Sure enough, when I relaunched the app and tried to login, the app asked me for that PIN that I was never asked to create.
I'm guessing that I created a PIN ages ago, and even though I have no clue what it might be now, there's no way to reset it that I can find in the app. Thankfully, there is an option from the app lock screen to log in using your password instead, which I used. I still can't find how to reset the app passcode, but you should absolutely have to create a new one every time you disable and then reenable the PIN.
A savvy user will have a strong passcode on the iPhone itself, but any app that has access to your financial information needs to be inherently secure. PayPal's app isn't nearly secure enough.
Falling Out of Favor
PayPal isn't all that useful for cashless mobile payments in stores, but then again, no system is. The two strongest players, Google Wallet and Apple Pay, haven't fully caught on either. So to say it's disappointing in that regard is as much a statement about the mobile finance industry as it is about PayPal as an app. For making and receiving payments from friends, PayPal is fine, but it can't match the company's own Venmo app. If your family and friends use PayPal, the iPhone app may come in handy for initiating or requesting payments on the go. But make sure you thoroughly log out every time you use the app. Otherwise, leave it off your phone.
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