PayPal to trial virtual debit card system

The eBay subsidiary first intimated its plans for the new payments system in July last year. The system generates a Mastercard number and one-time card verification code that are linked to PayPal accounts and used when paying for online purchases in place of the customer's regular credit or debit card number.

Whenever a customer is purchasing from a site that supports MasterCard, the PayPal system will ask ask if payment should be made via virtual debit card. Using technology from Orbiscom, the virtual debit card generates a unique number for each new purchase.

The generated number will be automatically filled in forms for retailers that accept MasterCard payments. Once that payment is validated and verfied, the generated number is discontinued.

The new service will replace PayPal's existing virtual Debit Bar system which uses a static MasterCard number for online merchants that don't accept PayPal directly.

The move is part of an initiative by PayPal to extend use of its payment system beyond its core eBay markets. The system will also generate additional revenue as PayPal will earn an interchange fee on every transaction made with the system.