goCatch is a smartphone app that allows users to see the location of participating taxis, make a booking, and then watch the taxi's approach on a map.
For drivers, the benefit is an additional source of bookings.
The app has now been updated to allow payment to be made from the phone via PayPal, reducing the risk of credit card skimming and related malpractices.
"By integrating PayPal, consumers and taxi drivers will be able to make and accept payments conveniently and efficiently at a much reduced merchant rate, through a known and trusted brand," said goCatch co-founder Andrew Campbell
"Payments can be made in as little as two taps and receipts are conveniently sent by email."
PayPal and the NSW government welcomed the development.
"At PayPal, we remain focused on doing what we do best, connecting consumers with merchants, in this case taxi drivers," said Paul Buchanan, head of mobile business at PayPal Australia.
"NSW Trade & Investment provided early stage support to goCatch through its Collaborative Solutions initiative, and has helped showcase the company's technology at a range of high profile global technology events including CeBIT Australia, CommunicAsia and Tech23," said NSW Deputy Premier Andrew Stoner.
goCatch is available for iPhone, Android and Windows Phone. PayPal is initially supported only in the iPhone version.