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PayPal has opened its payments platform to outside developers, enabling, for instance, consumers to accept PayPal on social networks or to use the system to exchange funds. For e-retailers, this means more consumers may use PayPal as a payment method.
PayPal has opened its payments platform to outside developers, a move that could increase the number of consumers with PayPal accounts and make the eBay Inc.-owned payment service more attractive to online retailers.
PayPal announced last week it was releasing new application programming interfaces that allow developers to embed PayPal’s payment system into their programs. Among the companies taking advantage of this offer is TwitPay, which lets Twitter users offer products for sale, taking payment via PayPal.
This initiative is not aimed at online retailers, which typically work through payment processors to accept PayPal and other payment methods. But it could make PayPal more attractive to e-retailers if it results in more consumers becoming familiar with PayPal, opening PayPal accounts and accumulating funds in those PayPal accounts that they can spend online.
The move could take PayPal beyond eBay and traditional online retailers, and help introduce PayPal to new users, says Ed Kountz, a payment analyst for Forrester Research Inc. “This could, and is clearly designed to, jump-start the network effect, boosting PayPal’s presence across both emerging and existing environments,” Kountz says.
PayPal today accounts for about 9% of online purchases by dollars, according to Javelin Strategy & Research, which projects PayPal and similar systems will grow by 14.5% annually through 2013.
EBay has big plans for PayPal, which includes both the PayPal system consumers use to pay and exchange funds, and a merchant-processing operation that handles payments on behalf of e-retailers. “We intend to approximately double PayPal by 2011 and we believe PayPal is well positioned to become the leader in global online payments,” eBay CEO John J. Donahoe told analysts last week in discussing eBay’s second quarter financial results.
EBay’s payments unit reported total payment volume of $16.7 billion in the second quarter, of which 45% came from payments made by the 75.4 million active PayPal users who have accessed their accounts within the past year. The remaining 55% came from the merchant-processing operation, which grew 26% from the second quarter of last year.
While the new APIs are intended to make it easy for a wide variety of individuals and organizations to accept PayPal, PayPal does not wish to be the payment method for less savory online retailers and service providers.
“We will vet both developers and applications to ensure they meet the security and usability requirements that our PayPal customers expect from us,” a PayPal spokesman says. He says PayPal could deny access to its system to applicants it deems unsuitable.