Today Paypal Inc. launched a new payment functionality that allows its users to pay each other by tapping two Near Field Communication (NFC) Android devices together. The feature actually follows an earlier contactless PayPal payment tool using Bump Technologies.

The feature also shows that Paypal is gearing up for NFC as part of its mobile payments. The feature makes use of a PayPal widget that allows a user to “request money” or “send money.” Whenever a user fills the transaction information and taps his/her phone against another phone (equipped with same app), the phones buzz together and after it users can decide to send or receive money by entering a PIN number.

Currently Pappal’s Android-to-Android payments will work only is U.S. on Samsung Nexus S from Sprint and T-Mobile but soon Paypal will expand this functionality to all other Android phones having NFC functionality. The transactions make use of an encrypted token and don’t access the secure element inside the NFC chip, where payment credentials are stored.

According to Paypal, the company is now on pace to do $3 billion in mobile payments this year. Much of that is person-to-person transfer using the PayPal apps. In many ways this feature is similar to and earlier feature of using Bump Technologies. However, Shimone Samuel; Product Experience Manager for PayPal Mobile said that NFC solution has fewer steps than bump payments and can be activated even when only one person has launched their widget. Bump Technologies required both mobile phones to have their Paypal payment apps opened.

Lets see how Paypal and Android users react to this step of Paypal. Let me and others know your thoughts about it in the Disqus thread below and keep visiting Gadget Media!