A day after a Visa exec publicly questioned the security of PayPal's new offline product, PayPal said its cloud-based payments offer more security than credit cards.

In an email to the Wall Street Journal, Anuj Nayar, PayPal's director of global communications, said personal financial information is "safer in the PayPal digital cloud than in your pocket."

The statement is a response to Jim McCarthy, Visa's head of global product, who said in a speech on Wednesday that PayPal's new digital wallet may leave users open to fraud.

"I think there's real issues around security," McCarthy said at a Goldman Sachs event in San Francisco.

PayPal's digital wall, currently being tested at several retailers like Home Depot and Office Max, allows account holders the option of paying at brick-and-mortar stores using their PayPal accounts. Users simply type in a mobile phone number associated with their PayPal accounts along with a PIN at the point of sale. McCarthy said the method could allow a thief to simply watch the numbers being punched in.

Nayar disagreed. "With PayPal, your financial information can't be lost or stolen from your wallet, your card or on your phone," he said in his email.

Nayar said the current solutions offered by payment giants like Visa and MasterCard are exactly why PayPal is entering the offline world

"PayPal is leading payments innovation for frustrated merchants and consumers limited by legacy systems and approaches," Nayar said his email.

Visa will be launching v.me, a digital wallet to compete with PayPal, sometime in 2012. The company also recently launched a new suite of services allowing financial institutions to offer more mobile financial services via Visa's processing platform.

For more stories on this subject visit the Security research center.

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    How can anything be called 'highly secure' if the solution is not based on a secure element - smart card, SIM, or microSD?
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