PayPal demonstrated a major upgrade to its mobile service earlier today at MobileBeat 2011, allowing any two NFC-capable Android Smartphones to carry out a peer-to-peer transaction simply by pressing them together. PayPal is hoping to replace old-fashioned credit cards and even older-fashioned cash by allowing you to pay with your Smartphone.

After struggling for many years around in the US,  NFC took a major leap forward when Google announced support for it in Android. Shortly thereafter, Google doubled down their efforts with the announcement of Google Wallet.

PayPal has one serious benefit over Google Wallet when it comes to NFC payments: hundreds of millions of users in nearly 200 countries already have PayPal accounts, while Google Wallet will be available in the U.S. only at launch. Based on how long it took the company to expand Checkout beyond U.S. boundaries, it could be quite some time before PayPal sees and serious NFC payment competition from Google on the global scene.

Here’s how it works:

1. Open the PayPal mobile app.
2. Enter in the amount of money you want to request.
3. Then press the two phones back-to-back and wait for the confirmation buzz.
4. Once a link between the accounts is established, both users enter their account details and pins to    complete the transaction. Just like that, the money is transferred. Afterwards, the normal email receipts are generated and sent out.

There’s no fixed date when to anticipate this, but PayPal says “late this summer”.  Another convincing reason for manufacturers to put NFC potential in their new models, or just a security concern?  Either way, we will discover out soon enough.

When PayPal’s NFC feature comes out later this summer, it will initially only work with Google’s Nexus S — the only Android phone now available with built-in NFC. But more NFC-enabled Android phones are due out soon.

1. Open the PayPal mobile app.
2. Enter in the amount of money you want to request.
3. Then press the two phones back-to-back and wait for     the confirmation buzz
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John Laster is a technical news junkie and Founder of TechieApps. He loves everything about digital world, technologies, social media and gadgets and has been prophetic in identifying the best ways to leverage and harness such news to drive sales growth for companies ranging from startups to huge organizations.