PayPal tries rewiring e-commerce with new interface

PayPal, eBay's well established but aging mechanism for online payments, is trying to rebuild itself for a new generation of online commerce possibilities.

At an event for press and developers on Thursday, PayPal and its partners described several new programming interfaces that are part of the company's upcoming Adaptive Payments Service and showed what developers can do with them.

For example, Microsoft will use the interface to enable payments within its forthcoming Azure cloud-computing service. And LiveOps' on-demand outsourcing service will use it to automatically handle fluctuating payment amounts and changes to who's being paid. Finally, the interface takes PayPal beyond the browser, opening it up for use on mobile phones, set-top boxes, and other increasingly smart devices.

"It's truly disruptive," said PayPal CEO Scott Thompson at the event. "It puts developers in the driver's seat by allowing you to do what you want to do and (choose) how you want to get paid."

The new service will be available to 300 PayPal partners starting Thursday, with a public beta this November--just in time for PayPal X Innovate 2009, its first developer conference.

PayPal is pitching the Adaptive Payments platform to developers as a way to more easily build PayPal-powered payment options into their applications. It's also a more streamlined version of PayPal's existing program for letting businesses manage transactions between several different parties.

The new payments service is a key part in PayPal's plan to double its revenues within the next three years. Back in March, PayPal's president Scott Thompson promised as much, saying that by 2011, the company should be doing somewhere between $100-120 billion in annual payments. PayPal has also had a fire lit underneath it since Amazon rolled out its own online payments service around this time last year. It let users make online purchases using billing information that was stored on Amazon.com

PayPal isn't just central to eBay's future. It will eclipse the company's auction and commerce operations, the company says.

"PayPal is a business that will be bigger than eBay," eBay Chief Executive John Donahoe said Thursday at the Fortune Brainstorm conference.

PayPal is a force to be reckoned with. On average, more than $2,000 goes through PayPal every second of each day. It has 75 million active accounts, and it's available in 190 markets and 19 different currencies.

Beta testing

Before the announcement, PayPal had been working with a handful of companies to test the new APIs (application programming interfaces). One of those companies is Microsoft, which is tapping PayPal for online payments in the Web applications built for the company's upcoming Azure platform.

At the unveiling, Yousef Khalidi, a Microsoft distinguished engineer, demonstrated an application that integrated PayPal's payment and billing functionality. It took only two days to integrate it into the existing product, Khalidi said.

Khalidi said that Microsoft plans to offer a simple way to build PayPal's mechanism into hosted applications as part of Azure's full release later this year.

Microsoft probably had an easier time choosing PayPal for its payment service than some of the alternatives: Amazon Flexible Payment Services and Google Checkout both come from companies in direct competition with Microsoft's Azure cloud-computing service.

Michael Ivey, CEO and co-founder of TwitPay, also took the stage to show his company's use of the new PayPal API--specifically to let people pay multiple people at once.

"In one transaction, I'm paying four different people," he said. Before the new APIs, the service would require users to make each payment as its own transaction.

Sites already using the new API include: Webassist, GroupCard, Lottay, Rainfall of Envelopes, and MedPayOnline.com

"PayPal will help you get paid for your innovations--your business will become our business," Thompson told the developers. "We view you as our third set of customers."

New features

The new payment service has a handful of new features designed to make it easier for developers to make money with their applications and services.

Thompson said that even if developers were acting as an intermediary between the person sending the money and the recipient, they would now be able to take their cut of that transaction--just as PayPal does.

Part of getting that to happen involves a new API that lets developers create peer-to-peer and business-to-business money-sharing applications. They can now also split up payments into several transactions and let users authorize a payment after the transaction's been made. Those two mechanisms can speed purchasing, regardless of whether the buyer is ready to pay the full amount at the outset.

As part of the new platform, PayPal also is changing the way fees are charged. Application developers can choose to have the sender of the money, not just the recipient, pay the fee.

In addition, the fee rates can be changed based on the type of purchase, which should ease the chore of handling both high-value transactions and micropayments (transactions below $12) within the same application. As it stands today, PayPal currently requires sellers to have two different accounts open, one for bigger payments and another for micropayments--and each has different rates.

People use PayPal today through a Web interface, but a new API will bring PayPal to nontraditional computing platforms including mobile phones, set-top boxes, and gaming consoles. That's important, given that those devices increasingly are networked and have their own ecosystems of applications. And moving to a browser can be disruptive to a user who just wants to make a quick payment.

Using PayPal that way also means that a developer must build the necessary user interface, though. PayPal didn't provide specifics on that element of the new payments system.

Overall, Thompson said the new payment system will help PayPal keep pace with changes in technology and business.

"The pace of innovation is just staggering," he said. "And the next wave of innovation is poised to move that much faster. "

CNET News reporter Ina Fried contributed to this report.

[cs2cdfan]

I got this from techcrunch, it seems some company has a patent for this http://retailzip.com/?page_id=47

[BtmnHatesRbn]

Good grief. More cloud computing.

[kieranmullen]

While having choices of payment providers is good, I do not see any real competition taking place. All the processing rates are all about the same. 3% What we need is an alternative to these payment networks (visa/mastercard) they make variable rate based on the amount transferred when the amount of information only increases by mere bits. KieranMullen

[Ilgaz]

How hard for Paypal to figure the main reason for people staying away is the Customer Service, the fact is they don't have a phone number, all customer service is handled by template clicking monkeys?<br /><br />As a side effect, companies doing business with them also asks old fashion fax etc. from certain countries which ends up as being called "racist" by their own potential customers. Developers who asks for Donation (or suggests) could have gone with other services not because they don't have "cloud" thing, people who wants to donate asks them to provide another alternative since they can't trust Paypal. Companies would be afraid of Paypal, just ask it to couple of open source developers. (CNET, I am talking to you!)<br /><br /><br />I had to cancel a $400 GPU order once since poor retailer (yes, they aren't amazon) had to ask me to fax my VIRTUAL credit card. When I dug deeper, I had to forgive them since they explained they aren't some large company who can compensate fraud and Paypal customer service is "as I would have guessed".

[ddesy]

If PayPal's changes are as bad as the recent changes to eBay itself, they will simply ended up making it more annoying to use for all involved.

[Renegade Knight]

The shift to a money focus is the first step to a dead company. That's certainly not why I used PayPal (but much less so now). I used it becasue it was a handy and inexpensive service. They just changed that so I just dropped my most frequent use.

[johnseanconn]

People still use PayPal? After quitting eBay because of scammers and PayPal because they try to force you to attach your bank account to your PayPal account (which, for me, resulted in PayPal making an unauthorized deduction from my bank account that took four months to resolve), I've done all I can to let as many people know how bad these companies are. Don't walk, run as far away from PayPal as you can.

[jharrisofkansas]

You can do as many companies do for banking.You make a bank account that all deposits go to including PayPal.You can set it up with your bank that all money in that account transfers over to your main bank account.This is common practice and would have offered you protection from PayPal dinging your account.

[toddchronister]

JHarris, the dual bank account approach you propose doesn't work either as a protective method. If you have funds from 'account A' automatically transferred to 'account B', then the problem arises when 'account A' has no funds and PayPal wants to make a withdrawl, resulting in an overdraft. This is of couse in reference to the example of when PayPal does the unauthorized deductions. So now PayPal has the money granted by your bank's overdraft assistance service AND you have the bank fees for their overdraft protection service at best, or possibly the bank fees for insufficient funds. What fun!

[vSente]

I am desperately trying to get off of Paypal. Navigating the site is slow - average of 5 seconds latency makes it impossible to do any serious ecommerce. Plus the customer support is horrific. Who are those people with the robot accents? Rather than opening it up to developers Papall needs to get its basic infrastructure in place.

[cyclonica1980]

When it boils down to it, its still a bunch of scammers. Pay-Pal and Ebay offer sellers no protection what so ever. I sold a laptop. and the woman who bought it said she didnt want it, and send an empty box back. Pay-pal told me to go contact my local law enforcement agency. Thanks scam-pal. <br /><br />Oh and for anyone keeping an eye on Ebay and Pay-Pal, they have lost more members in the past two years because of incidents such as this. The feedback system totally favors buyers and is riddled with people who try to steal from honest sellers. I would love nothing more than to see this company fail. But hey thats just me.

[hondaracer123]

PayPal is the greatest scammer of them all, I have suffered tremendously because they have frozen my account and all the funds in ($7,500) it for 6 months, after being unemployed for 1.5 years I found a way to make money by selling on eBay until one day I decided to request a funds transfer to my bank account and this striggered an inquiry to Equifax, because my credit is not perfect they decided to freeze the account to "minimize risk", I had actually already renegotiated my mortgage and was making payments. I am bound to lose my home for sure niw because the Pay-thieves have left me pennyless. PayPal will pull your credit without your authorization even if they are not providing you any kind of credit or financing. Also like cyclonica1980 commeted if the buyer wants to scam you they can do it very easily as they don't care if you as a seller are sent your merchandise back, as long as you are sent something with a tracking number that is all that they care about. I sold a $550 brand new car amplifier and was sent back a used and damaged one in return, PayPal told me to contact the police. I am in Florida and the Buyer/Scammer is in California. What is the local PD supposed to do? I would also love to see them fail, that is 2 of us already Cyclonica!