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PayPal, The Fifth Credit Card?

With its popularity growing among online shoppers, online payment play PayPal is positioning itself as the "fifth credit card" for online transactions as it rolls out its latest beta.

The e-commerce transaction company has released three application program interfaces that developers can use in order to plug PayPal into e-commerce sites, and help sites deploy Web services .

As a result of the latest beta releases, online customers paying for online purchases by Visa, MasterCard, American Express and Discover credit cards might in the future be paying for their purchases using the San Jose, Calif., company's service -- even though it's not a bank.

PayPal Web Services are based on recognized standards like the Simple Object Access Protocol and Web Services Description Language , embedding the service deeper into the platform. The three APIs -- TransactionSearch, GetTransactionDetails and RefundTransaction -- will be followed up with a MassPay API in June and several more in the third and fourth quarters of 2004, including one that provides single and batch processing invoice capabilities.

Alan Tien, a senior API product manager at PayPal, said the new interfaces are a step up from their existing reporting system, Instant Payment Notification (IPN), and gives the merchant instant information about transactions taking place.

"In the past you could get an asynchronous notification, IPN, of the transaction details when they finished the transaction," he told internetnews.com.

"Now, what we've added on top of that is the ability to get a synchronous transaction ID upon completion of the payment, and then you can do an API call to get the rest of the information, [through] the GetTransactionDetails call."

Additionally, what PayPal Web Services brings to the table, Tien said, is, well, more public Web services.

"Sure, Web services has been the buzz around developers for the past two years and people have been talking about SOAP and WSDL and maybe even whispering about [Universal Description, Discovery and Integration ] for a long time, but how many public examples are there?" he said. "Google and Amazon.com have rolled out public Web services and ours is in that same vein, but our thinking is, 'hey, we're actually moving money instead of just getting information or making an order."

The API release is intended to break PayPal's primary operations outside of the eBay crowd and small-business industries and into the enterprise. Not everyone's convinced, however, that the interest is there for PayPal's service, which requires a stop through its servers between customer and merchant.

Roger DeSousa, manager of Boulder, Colo.-based ecommerce Web site developer EtchedWeb.com, said companies don't like to lose control during the transaction process and he hasn't heard much demand for PayPal's inclusion as a payment method with his customers.

"PayPal is something that some have asked [for], but to date we haven't actually integrated any Web sites," he told internetnews.com. "Quite honestly, the ones who actually go with PayPal are the ones that can't get a merchant account or don't want to get a merchant account or don't need a merchant account."

Officials at PayPal actually consider that seeming disadvantage as a selling point: by keeping authentication and credit card processing inside their servers, it frees merchants from being held liable for protecting a customer's personal information.

PayPal is making security a big part of its pitch at a time when the growing number of online credit card and identity theft claims -- 27.3 million the past five years, according to a September 2003 Federal Trade Commission (FTC) report -- means many people are staying away from online shopping entirely to avoid that fate.

Dave McClure, PayPal Developer Network (PDN) senior manager, said PayPal is actually more secure than using the credit card online, as the number resides in one place (behind its own firewalls) rather than scattered over every site customers make online buys.

And with approximately 45 million registered users, McClure said he thinks the service is as popular as many mainstream credit card companies online today.

"I think we've really started to hit the radar for a lot of these people in terms of offering them a broad customer base that's got a payment method they want to use," he told internetnews.com.

McClure said those numbers will be enough to convince most businesses to try it out; PayPal might not bring the same transaction volume as a Visa or MasterCard, but enough to justify the effort.

"What a lot of these larger merchants have found there's only another five to 10 percent of their audience that might be interested in using another type of payment method, as long as that payment method is widely distributed it makes sense for them to increase the amount of revenue they can collect," he added.

Also announced Monday was the launch of a site for developers to test the APIs, called the PayPal Sandbox. At the site, developers can run their Web service through the sandbox to see how it will work in a live environment.

Also included at Developer Central is a discussion forum monitored by PayPal customer service reps and developers.