PayPal is developing a new contactless payment system that will allow users to pay for purchases with their smartphones instead of plastic cards by tapping phones on payment terminals. This move positions PayPal to compete directly with other contactless payment systems like Google Wallet that rely on near-field communication (NFC) technology. PayPal's new system does not require NFC, which many analysts believe gives it an advantage by working on more phones and offering a similar user experience to contactless cards.