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PayPal's New Favorite Color is Brown

PayPal Monday forged a relationship to combine its online payment process with digital shipping tools courtesy of United Parcel Service (UPS).

The new service, dubbed "PayPal Shipping With UPS," starts Thursday and allows shipping functions to be completed by buyer or seller within PayPal's Web site. The service is available to any PayPal user.

The agreement with PayPal also marks the first time that UPS has incorporated its shipping API into a third party's branded product.UPS helped modifying its technology in the last six months using a number of PayPal customers.

"By integrating UPS shipping functionality into PayPal's 'PayPal Shipping With UPS,' we are making it faster than ever for our customers to complete online transactions," said UPS manager of Electronic Commerce Marketing Alan Amling.

How it works is the PayPal service automatically sends payment to the seller once a transaction is closed. Customer shipping information is imputed into a UPS shipping label as a one-step process. The seller is then instantly paid for the item and receives all of the information necessary to simply print a shipping label. The buyer, in turn, receives an e-mail with a linked tracking number confirming shipment of the product as well as an expected date of delivery.

Before this technology was introduced, sellers had to arrange for shipment of a product as a separate transaction and had to re-enter shipping information, leaving more room for error.

As a rule PayPal doesn't get much involved in the transfer of goods, just the money side of the business. The company has its own fraud and chargeback protection standards in place. PayPal's relationship with eBay asks that sellers be responsible for their own shipping, although the San Jose, Calif.-based online auction site does prefer you use traceable shipping methods like Mailboxes Etc. or FedEx.

Because UPS bills sellers directly for shipping charges via a PayPal virtual debit card, the shipping company says sellers do not need to worry about collecting additional money for shipping and buyers are not overcharged.

Some type of assurance is in high demand. One in every 20 consumers has been the victim of credit card fraud in the past 12 months, according to a recent Gartner Group study and 1 in 50 consumers has suffered identity theft.

In January, the Federal Trade Commission reported that of the 204,000 consumer complaints lodged with it last year, 42 percent of them involved identity theft. Privacy advocates say the number of victims of identity theft may number 750,000 a year, with victims losing tens of millions of dollars.