EBAY Inc's PayPal division, aiming to get American cab drivers and small merchants to use its payment system, has unveiled a new card-swiping device that scans checks and works with all four major credit card networks.

The reader, which plugs into a smartphone, can accept payments from Visa, MasterCard, Discover Financial Services and American Express cards, PayPal said in San Francisco on Thursday to introduce the device. It also can let retailers get delayed payments by sending out invoices, and it encrypts account information so credit card data isn't stored on phones.

The product helps PayPal extend its foothold in e-commerce transactions into the brick-and-mortar world by making it easier for merchants to use its technology. The company will give away the thumb-sized card reader, called PayPal Here, and provide the accompanying smartphone app for free. EBay then makes money by charging a rate of 2.7 percent on transactions.

"We are one of if not the lowest-cost provider," said John Donahoe, chief executive officer of eBay and interim president of PayPal. "We try to see where the world is going and create products to fit that."

The company has been investing in data centers, software and talent to handle an increased volume of payments - expected to reach US$7 billion on mobile devices this year.

PayPal Here will compete with a product from Square Inc, a San Francisco startup begun by Twitter Inc co-founder Jack Dorsey. Square's reader, which also accepts all major credit cards, charges 2.75 percent.