PayPal, a provider of online payment services, will provide application programming interfaces (APIs) to let third-party developers and merchants build applications that integrate with the PayPal system.
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The four APIs will use open standards for web services such as Simple Object Access Protocol (Soap) and Web Services Description Language (WSDL).
With this move, PayPal hoped to lure advanced technical developers and enterprise customers to its online payment platform, said Dave McClure, senior manager of the merchant services business unit at the PayPal Developer Network.
"The APIs open up PayPal functionality and a more advanced set of services," he said.
PayPal will expand its user base from its core audience of individuals and small businesses, which make up the bulk of its 45.6 million registered accounts in 38 countries. The total value of transactions handled by PayPal in the first quarter of 2004 was more than $4.3bn.
"This is big news. It opens up whole new markets for PayPal," said Gartner analyst Avivah Litan.
PayPal will now be able to offer its payment services to companies that enter into subscription-type billing arrangements with customers, arrangements which require recurrent payments, Litan said.
Previously, PayPal was not set up to cater to this type of client, such as providers of digital content. So far, credit cards have been the main method for paying for these services, but if PayPal can lower the cost for the content providers, it will make inroads into the market.
PayPal will also be able to serve as a provider of electronic fund transfers, handling, for example, the transmission of salary payments to a company's employees, competing head-to-head against banks, she added.
The adoption of open standards for web services is making it easier for third-party developers to take advantage of the APIs from companies such as PayPal, said Jason Bloomberg, a senior analyst with ZapThink.
Without open standards, a company would expose an API and would have to provide a toolkit for developers along with it, which makes the process more cumbersome, he said.
"Open standards make it more straightforward to take advantage of APIs and opens them up to more people," Bloomberg said.
The four PayPal APIs are:
- TransactionSearch: for retrieving basic details of a transaction
- GetTransactionDetails: for retrieving all details of a transaction
- Refund Transactions: for reversing a transaction and triggering a refund
- MassPay: for automatically transferring funds to one or many recipients
All but MassPay are available now. MassPay is expected to be available next month.
"This is the beginning of our API offerings. This is a family of features we will be enhancing in coming quarters," said Alan Tien, product manager in the PayPal merchant services business unit. An API that will likely be added before the year is over is one for invoicing functions.
As companies expose internal functions through web services based on open standards, they by definition introduce new security risks, Zapthink's Bloomberg said.
PayPal has a good reputation on the security front, and seems to have covered the necessary bases before launching these web services.
The PayPal web services architecture shares a common API structure with the web services offerings of eBay, PayPal's parent company.
PayPal will also launch an information hub for its e-commerce developers called PayPal Developer Central, available via registration at developer.paypal.com. It is part of the PayPal Developer Network, which is at www.paypal.com/pdn.
Juan Carlos Perez writes for IDG News Service