I'm using the Paypal 'Express Checkout' option in Magento.
(I'm not using any express checkout buttons, it's just because I was having problem with returning from Website Payments Standard).

In Paypal's Website Payment Preferences, I've set the 'Contact Telephone Number' field to off.
I've also made a number of changes on the Magento side to make telephone number optional (as per this post).

However, the telephone number field still appears during Paypal checkout, and is mandatory. Obviously, this is potentially going to cause customers to abandon the transaction.

Initial response from Paypal support is that the telephone number is always mandatory, that the preference setting only controls whether or not the value is returned to the seller - this doesn't sound right to me, since it makes the setting largely useless.

Given that Magento usually requires a phone number, I'm wonder if possibly something in the Magento Paypal API call is overriding the default setting?

There must be some way of making the phone number optional?

Edit:
It would appear after further contact with support, and some more digging, that despite the description of the parameter, Paypal will always insist on a contact number for non-Paypal accounts (i.e. paying directly by credit card). This applies for Website Payments Standard and Express checkout at least, possibly more. The 'Telephone number off' parameter then controls whether the phone number entered is returned to the store.

This strikes me as daft. If I'm on a checkout somewhere and asked to enter a phone number,I don't particularly care whether it's Paypal or the merchant asking me for it, I'm not going to be happy about it and quite possibly abort the transaction, especially if it's for a site I haven't shopped with before

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