Hey Facebook, PayPal Will Rock You in Payments

There has been talk recently about how Facebook is starting to get into payments and at first I thought it seemed like a good opportunity for Facebook, with the potential for a big financial score.

But it is really PayPal that is headed for the big score.

Essentially, PayPal is looking to become the payments architecture for the web. If you look at the two leading Twitter payments startups — Twippr (twitter.com/twippr) and Twitpay (twitter.com/twitpay) — both are actually PayPal payments systems clothed in a Twitter app.

And now PayPal is trying to take its effort to become the web’s payments architecture to a whole other level. PayPal is introducing something called Adaptive Payments, which appears to be a full-on API for payments. (Kudos to TechCrunch for breaking the story here.)

TechCrunch:

Very similar to Amazon’s Flexible Payments Service (FPS), the Adaptive Payments API handles payments between a sender of a payment and one or more receivers of the payment. Adaptive Payments allows almost the same functionality as FPS. The new API lets developers become a payment aggregator, which we are told is something against PayPal’s current Terms of Service. Amazon’s FPS also lets developers aggregate payments. Moreover, Paypal’s Adaptive Payments has built in micropayments support, another feature of FPS.

Another feature would allow for distribution of payments to multiple recipients. Here’s what it looks like in graphical form:

If you believe, as I do, that much of what is free on the web right now will likely become paid services, PayPal’s move to a more open architecture has wide ramifications. The fact that PayPal and not, say, JPMorgan’s Paymentech is at the forefront of this is a statement on where payment innovation is coming from today. Mind you, this is not a passive effort on the part of PayPal. Later this month PayPal will host web developers at a free conference to encourage them to use Adaptive Payments. It was just this kind of event that spurred massive app building on Facebook.