Office Depot is the latest big box retailer to test PayPal’s point-of-sale that lets shoppers pay for in-store purchases by typing in their mobile phone number and a PIN. 

The news, which was first reported by Reuters, makes Office Depot the second major retailer to test PayPal’s POS following Home Depot. The home improvement retailer recently rolled out a trial of the system to 51 stores and PayPal expects it to be in all 2,200 Home Depot stores by the end of the first quarter.

“We saw mobile shopping grow tremendously in the 2011 holiday season—some reports I’ve seen say it doubled – and it’s clear that POS is an important touch point where consumers are going to expect a mobile solution,” said Sophie Vu, director of marketing at Kony, Orlando, FL.

A spokeswoman for Office Depot declined to confirm the details and said only that the retailer is looking at a number of different innovative commerce solutions.

Wallet in the cloud
PayPal’s POS service is tied to its “wallet in the cloud,” enabling users who have a PayPal account to pay for in-store purchases by typing in their mobile phone number and a PIN or swiping a PayPal card and entering an PIN.

The PayPal POS terminals are also able to handle NFC payments, although neither Home Depot nor Office Depot appears to be taking advantage of this technology at the moment.

In the Reuters article, an Office Depot executive said there are still some rough spots in the experience as well as some limitations in terms of service carriers that support it.

Home Depot was the first major retailer to install PayPal’s POS service. The program has been in use since early December in five Home Depot locations in the United States.

PayPal continues to work with a number of retailers to deliver mobile shopping experiences for consumers. The company has said it expects to offer the POS service at 20 major retailers by the end of the year.

In December PayPal tested a NFC-enabled mobile app in two retail locations in Sweden.

PayPal already handles a significant volume of mobile transactions, with mobile payment volume reaching $4 billion in 2011.

Parent company eBay recently said it expects PayPal to do $7 billion in mobile total payment volume in 2012.

Mobile transactions grow
The growth in mobile payment transaction volume is being driven by the success of PayPal’s mobile-optimized checkout for retailers and the rapid increase in consumer adoption of mobile shopping.

PayPal currently has more than 17 million customers regularly making a purchase through their mobile phone, up from the eight million it reported in June.

“Not just in POS but in mobile generally, apps that leverage the unique native capabilities of mobile devices will be the winners, whether they are built using HTML5 or a hybrid approach,” Ms. Vu said.

“It’s also clear that consumer apps are just part of the story – clerks and store staff need access to apps as well, in order to serve customers better and extend the rich content companies have in their data stores out to the retail floor,” she said.

“Also, mobile is an opportunity for retailers to better compete with online stores and the ‘showrooming’ approach, by offering consumers better, more personalized service, and things like real-time discounts.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York