EBay has paid $370m to buy VeriSign's payment gateway business which the auction giant plans to integrate into its PayPal web-based payment service.

The deal includes a commitment to add VeriSign's security products, including two-factor authentication and digital certificates, to the revamped PayPal site.

EBay hopes that the acquisition will give its PayPal division a bigger foothold in the small and medium-sized business market as it looks to expand from its traditional consumer base.

"This acquisition allows PayPal to give our customers more choice in payment services and grow our merchant services business even more quickly," said Jeff Jordan, president of PayPal.

There are increasing calls in the finance industry for two-factor authentication to become the norm. Advocates point to The Netherlands, where most banks use the technology, as evidence that it can cut fraud significantly. 

But security experts have warned that such systems are easily cracked, and predict that, after an initial drop in crime, the numbers will bounce back up.

Antivirus companies have already reported on malware that can get round two-factor systems.

Stratton Sclavos, chairman of VeriSign, called the deal "one of the largest consumer authentication deployments in the industry".