PayPal announced today that it has acquired card.io, its partner company that allows developers to use a smartphone to capture credit information.

In the mobile payments space that is becoming increasingly crowded with major players like Square and Google Wallet and minor upstarts like Venmo, PayPal has acquired its first company in over a year. While last year’s moves were aimed at mobile payments, this acquisition points toward bolstering PayPal’s digital wallet–the area where Square, Google Wallet and others have boldly entered before PayPal.

In a PayPal blog post, Paypal VP of Global Product Hill Ferguson wrote that, “The employees at card.io will be joining the PayPal global product team in San Jose to help us create new experiences to make it even easier for consumers and merchants to use the PayPal digital wallet. The current card.io technology will remain available to developers for use in their own applications.”

Will users favor Paypal’s hardware-less mobile payments (left and center) over Square? That’s what the company is betting on.

According to one source, “The whole ethos at PayPal right now is to bring in as many technologies for processing as possible.” When the company saw what Square was doing, they created Here, and card.io fits in perfectly with this plan.

Update (3:30 PM)