It has been over a year since PayPal shook the payment industry with the introduction of Adaptive Payments and the PayPal X platform, making it an opportune time to evaluate how open payment platforms may help further weave payments in the fabric of commerce.

With PayPal X we launched the era of “embedded payments,” potentially profoundly changing the network effects that have governed payment systems. Opening the payment flows enabled a number of transactions in the social and commercial spaces that were difficult if not downright impossible to complete over traditional payment engines. Giving access to account management function built an entirely new set of acquisition channels with application developers and service providers.

The significance of the event was not lost on the industry. In the months following the introduction of PayPal X, other payment networks launched innovation labs and other more or less open platforms. Beyond payments, Yodlee launched its FinApp store for developers; Facebook launched Facebook Credits, its virtual currency system for Facebook Apps. 2010 will go down in history as the year payment platforms burst to the front of the e-commerce scene. As Scott Thompson likes to tell us: “Payments are hot again!”

Why does it matter? The electronification of payments is a seminal trend that fueled the success of payment networks for several decades, and should generate an estimated $3.5 trillion in transactions this year in the U.S. alone. Yet this is a only a fraction of the addressable market, as long as we can extend payment functionality beyond its current reach at simple checkouts and Point of Sales. Much of today’s advanced commerce applications require a richer set of payment instructions, more varied transactions flows and support for many more data types than are used today by traditional retail commerce.

In today’s connected world, the distinction between commerce and payment is increasingly blurred. Already the notion of “checkout,” mimicking that of a physical store, is challenged: app stores and music stores for instance have substituted pre-registration and authentication for the act of approving an order and selecting a form of payment. Increasingly as buyers and sellers connect over mobile or internet connections, they exchange information in a string of activities that include payments as an embedded step.

Consider the not too hypothetical case of a consumer ordering a pizza on a mobile phone, after having received a targeted digital coupon tied to her loyalty card which she will redeem at the restaurant by flashing a 2D bar code while paying with an account linked to her mobile number. Think it is improbable? Think again. Already Domino’s Pizza has experienced serious sales lift from targeted mobile couponing, and the likes of Target and Starbucks are exploring 2D bar codes on smart phones used in the store. These programs are demonstrating that in the single flow from lead generation to post purchase service the consumer is better satisfied with a fully integrated experience. Such integration requires different applications – in this case targeted promotion, loyalty, payments, order management – to share data, potentially across the systems of different services providers. This can only be accomplished by opening up the various platforms involved.

This example shows not only the blurring of the lines between commerce enablement and financial transactions, but also between face-to-face transactions and online ones. There is no denying that our current payment infrastructure has been optimized for face-to-face transaction. Labeling online transactions “card not present” is the best demonstration of that. Buyers and sellers, but also peers involved in a casual transaction, need new tools to establish an account relationship and complete transactions. With its platform PayPal is excited to be at the heart of the creation of the future of money.

Quelle: thepaypalblog.com