Today during a lunch event, Microsoft revealed that PayPal would be releasing a new version of its credit card-swiping dongle and app for Microsoft devices like the Surface.

While Microsoft already services businesses large and small with hardware and software, it hasn’t focused on being a point-of-sale system. This new integration with PayPal throws Microsoft into a new area of small business — and one that is fiercely competitive.

Microsoft says that it can stand out in this arena, because the Surface, starting at $799, is cheaper than the iPad and its large network of developer apps can be tailored to any business environment. In its developer app network there are 20,000 mobile payment-related apps alone, Microsoft says, to say nothing of total apps for small businesses. Plus, it notes, the Surface has the processing power of a computer, so it can do more than a tablet.

But even with a cheaper, more powerful tablet and PayPal’s help, Microsoft is entering an incredibly competitive space.

There is a lot of competition in point-of-sale technology right now, and who will win is anyone’s guess. Square, which was the first company to introduce a mobile card reader that plugs into a headphone jack, is pushing its small business point-of-sale tech by building out back-office applications like appointments and inventory. The company also recently launched its chip card reader and rolled out its technology worldwide.

Meanwhile, e-commerce giant Amazon recently threw its hat in the physical store ring with Amazon local register, a way to connect with its sellers that also have offline shops. So did Etsy.

Plus, an entirely new class of companies has emerged, like Poynt, founded by former Google Wallet guru Osama Bedier, which, like Apple and Microsoft devices, has a developer platform. There are also of course, the traditional players like First Data and Verifone.

PayPal also competes in this space and has long processed payments for small businesses, so it’s not a bad partner for Microsoft to have. Since 2012, PayPal Here has provided payment processing to physical stores. And it already has a chip-and-PIN card reader that it will be releasing to the U.S. this year — meaning the Microsoft Surface can easily support chip cards when they come along later this year.

But when it comes to small business products, it’s all about adding value. So, even with PayPal now available on the Surface and Lumia devices, Microsoft is going to have to prove that it can do more than what’s already out there.