The initiative is being tested at 16 locations during the upcoming South by Southwest festival in Austin, TX with the aim of extending the partnership if the test is successful. The PayPal-enabled Tabbedout app will be available in both Apple’s App Store and Google’s Android market within the next week.

“PayPal with Tabbedout is yet another example of how we are working to make payments easier for consumers and merchants,” said Jennifer Hakes, a spokeswoman for PayPal, San Jose, CA.

“We are continually looking for opportunities to reduce the friction points at retail by bringing streamlined and secure payment options to our loyal users, whenever and wherever they may be,” she said.

Mobile meals
Under the deal, consumers at participating restaurants will have the option to pay with their PayPal account via the TabbedOut app.

Restaurants that are participating include The Woodland, Polvo’s, Dog and Duck Pub and Rasta Pasta.

When diners open the app, they can use their device’s GPS to find the restaurant.

Once users have found the restaurant, they can add their PayPal account information and pay directly from the app.

This initiative marks the first time that PayPal mobile payments will be accepted by restaurants and bars in the United States.

Tabbedout claims that its software integrates into 70 percent of point-of-sale systems in bars and restaurants, showing the potential of the app to be incorporated by more restaurants and bars. The company currently works with 400 locations in the U.S.

This is not the first time that Tabbedout has tested mobile payments during South by Southwest.

Last year, the company partnered with JiWire on a campaign that let users test mobile payments on  a bar crawl (see story).

“While we expect the PayPal offering to be popular with consumers, this is a new relationship that is launching in a select group of locations in Austin,” said Rick Orr, cofounder of Tabbedout, Austin, TX.

“As we add PayPal as a payment options at more locations, we expect the number of overall transactions to grow,” he said. “I can say that PayPal integration has been the biggest request for consumers.”

Virtual payments
PayPal has aggressively been pursuing mobile payments lately to get into the space.

Most recently, the company announced that it has begun working with European carriers to help make mobile payments more accessible to merchants (see story).

Additionally, big box retailers Home Depot and Office Depot are also testing PayPal’s point-of-sale solution.

PayPal is only one of the tech giants aiming to make mobile payments more widespread. Competition includes Google Wallet, MasterCard’s Mobile Money Partnership Program and Isis.

“By integrating PayPal into the Tabbedout app, consumers have an easy, secure and reliable way to settle their tab,” Ms. Hakes said.

“The seamless process that consumers have come to expect from PayPal online can now be experienced from their phone when they are dining or drinking at Tabbedout bar and restaurant locations,” she said.

“The tight integration creates an easy-to-use user experience within the Tabbedout app while providing the millions of PayPal users another way to pay in real-time all the while ensuring their personal information is safe and secure.”

Final Take
Lauren Johnson is editorial assistant on Mobile Commerce Daily, New York