PayPal Canada is launching a Toronto pilot project of its new software that allows restaurant patrons to pay for meals using their smartphones.

The online-payment pioneer is looking to to expand its business by introducing new electronic-payment options to brick-and-mortar stores, said Darrell MacMullin, managing director of PayPal Canada.

It is partnering with TouchBistro, which operates iPad-based point of sale terminals at Canadian restaurants, food trucks and cafes, to launch the restaurant payment service in Canada.

paypal-touchbistro

PayPal Canada is working with TouchBistro to convince restaurant customers to pay via cellphone. (CNW Group/PayPal)

Jimmy's Coffee, a coffee shop in the King West neighbourhood that previously accepted only cash and debit card payments, is one of the first restaurants to accept PayPal mobile payments via a TouchBistro device.

Select restaurants throughout the city will help pilot the technology. PayPal has already launched a similar system in the U.K.

Restaurants pay a percentage of the bill — between two and three per cent — to PayPal for every transaction. 

PayPal Canada is promoting the smartphone payment option to restaurants as a way to add a mobile payment option without investing in new hardware, MacMullin told CBC's Lang O'Leary Exchange.

"Merchants are reluctant to jump in with new hardware. Our process has not been about selling hardware, but piggybacking on what is out there," he said.

"As simple as updating an app on your phone, they can upgrade and start taking PayPal payments," he said.

In addition to TouchBistro, PayPal is looking a striking deals with other makers of point of sale systems for restaurants.

He also sees the technology as a way for restaurant staff to interact more effectively with customers, who can "check-in" to the restaurant before they arrive and be greeted at the door by name or arrange to have their order ready.

"The future is about data and connectivity and how do you provide value to merchants to interact with customers," MacMullin said, adding he is hoping that aspect will help restaurateurs overlook PayPal's service fees.

The user photo that pops up when a customer pays or orders also helps the restaurant verify who they are dealing with, an additional security feature.

There is a heated race involving banks, telecom and tech giants such as Google and Apple to get consumers to adopt technology to pay via mobile phone. The so-called wallet-free experience allows customers to pay using an app on the phone they already have in their hand, rather than digging around for a wallet.

Ottawa-based Shopify is launching a similar app for other kinds of retailers and Square and Groupon are also trying to cultivate this market.

PayPal has about five million Canadian customers and 132 million active accounts worldwide.