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PayPal Expands Its Horizons Beyond eBay

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Arguc DC3810 digital still camera at CompUSA.com: $299.99.
The ability to pay for anything on these sites with PayPal: Priceless.

In a move that gives online shoppers an alternative payment option to credit cards and electronic checks, Mountain View, Calif.-based payment provider CyberSource Corp. Thursday said that it will enable merchant customers to accept online payments via PayPal. The partnership will begin immediately.

News of the new relationship came on the same day PayPal launched a special payment service in the United Kingdom, allowing British online buyers and sellers to send and receive payments to more than 31 million PayPal members around the world. The British version PayPal's payment service will work exactly like the U.S. version, complete with the same fraud protection for chargebacks from qualified transactions.

Back at PayPal headquarters in Sunnyvale, Calif., company executives said the CyberSource partnership opens up new channels of business for PayPal payment services all over the world.

"In the past, we've been responsible for acquiring our own customers," explained Peter Ashley, the company's senior manager of business development. "With CyberSource, it is the first time that we have worked with a partner to acquire a new base, and that base fits perfectly with the customers we have already."

At CyberSource, officials echoed these sentiments in explaining how they plan to incorporate PayPal into their existing payment engine. Currently, CyberSource small business clients provide their customers with the option of making online purchases with credit cards, electronic checks and foreign payment instruments. According to Steve Klebe, vice president of strategic alliances, PayPal will become a fourth option, enabling his clients to appeal to an even broader base of e-commerce customers.

"For people who might not want to give sensitive credit card or checking information to a particular one of our clients, PayPal opens up a whole new world," Klebe told internetnews.com. "Adding PayPal is another step in the ongoing quest for fulfilling a merchant's desires to give their customers multiple payment choices."

The PayPal payment service enables customers to transfer money directly to or from a separate account. The service works like a bank account (without interest), and many regular users actually keep chunks of money on deposit at PayPal. PayPal makes money off the service by charging a small transaction fee for every purchase. The service is the predominant payment method of online auctions, and was the impetus for eBay to acquire PayPal in 2002.

This summer wasn't been entirely rosy for PayPal's corporate image. In August, the company extinguished a firestorm when parent firm eBay chalked up $10 million to the federal government to end charges that it had violated the U.S. Patriot Act by transmitting funds earned through online gambling. PayPal also came under fire in July, too, when a charlatan used a legitimate SSL certificate to masquerade as a PayPal site.

With the latest bits of news, however, analysts said things for PayPal could be looking up.

"Until today, PayPal was a service primarily used for person-to-person payments," said Rene Pelegero, president and managing director of the Retail Payments Global Consulting Group in Woodinville, Wash. "The relationship [with CyberSource] mainstreams the PayPal service with medium and large merchants and provides a payment alternative for consumers that trust PayPal but do not want to share their payment details with all of the merchants they [use]."