Much as the iPhone took off after Apple opened its platform to third-party developers, PayPal hopes that opening its systems to outsiders will open up a vast new landscape for mobile and online payments.
The "outsiders" are software developers that run Web sites, shopping card programs, or other interfaces that involved payments - in most cases merchants wishing to accept PayPal payments. The goal is to make PayPal easier to use for more complex transactions, in areas beyond the traditional "click-here-to-checkout" circumstances where its own tools are focused. It also allows PayPal's parent company, eBay, a competitive play against rival Amazon.com, which is stepping up its own online payments efforts.
PayPal hopes "to unleash developer innovation" through the move, Osama Bedier, vp of platform and emerging technology, wrote in a corporate blog posting earlier this summer. Other companies have had mixed results with this strategy. Apple Inc.'s App Store has been a huge hit, but in payments, Amazon has not been so successful.
Gareth Lodge, the regional research director for Europe at TowerGroup Inc., an independent research unit of MasterCard Inc., says PayPal is raising its profile at a critical point.
"This is partly making sure they're playing in the market, but also trying to identify all of these different payment occasions that they can address going forward," he says.
PayPal is not the first company to give outsiders access to its technology. Amazon rolled out its Flexible Payment Service in 2007, enabling third parties to craft tools for its payments systems.
However, Lodge says Amazon's service "hasn't, as far as I can see, gained a huge amount of traction." (An Amazon spokeswoman said "hundreds of thousands" of developers have registered for its Amazon Web Services, which covers payments and many other capabilities.)
Aaron McPherson, research manager for payments at IDC Financial Insights, says PayPal "is something a lot of people already have," and "it would make a lot of sense for" users "to sign on with PayPal."
