The online payment system, PayPal, is soon going to give its users a password-generating key fob, meant as a weapon against data-thieving phishers, and as a way to protect users' payments over the Internet.

eBay, which owns PayPal, is coming out with a new electronic security key that can actually be clipped on to a keychain, and that displays a new one-time password in the form of a six-digit code about every 30 seconds.

The key will give users another layer of security for their accounts, and users who sign up for the device will need to enter their regular passwords as well as the number displayed on the key whenever they log on to the online payment service. As the numeric password changes so frequently, phishers will end up with obsolete numeric passwords, and will be unable to empty PayPal accounts. In this way, if a user does become a victim of a phishing scam, and gives away his/her password, the phishers cannot empty the user's account because of the constantly changing password.

According to Sara Bettencourt, spokeswoman for PayPal, if a fraudulent party somehow gets hold of a person's username and password, they still would not be able to get into the account because they don't have the six-digit code. This is just another layer of protection.

The system, based on security firm VeriSign's One-Time Password Token product, is now being tested by PayPal, and the firm will come up with a beta version for users in the US, Germany, and Australia in February this year. And towards the latter half of the year, the company will offer the device to all users of the payment system.

It is also learnt that this security key could be an important tool for PayPal, whose Web site is frequently spoofed by phishers looking to steal user account information.

Meanwhile, the PayPal security key will be offered free to business accounts, while the company will charge $5 (Rs 221 approx) for individual users. Bettencourt said that PayPal has been testing the device with employees for a couple of months, and plans to start trials with customers in the next month or so.