Two enduring tenets of Web 2.0 are “A platform beats an application every time” and “All the smart people don’t work for you.” Companies that take those bits of wisdom to heart find ways to engage developer communities to extend their products–and the result can be creative, surprising new applications that would never have been developed from within. Online payment giant PayPal recently announced the PayPal X APIs, a new group of developer APIs designed to enable new applications that can more tightly integrate with PayPal services. To encourage developers to create some awesome applications with the APIs, PayPal is offering prizes $100,000 and $50,000 (in cash plus waived transaction fees) for the best new applications. We caught up with PayPal’s director for their Developer Network, Naveed Anwar, as he prepared to deliver a talk in Beijing, and he filled us in on what the new PayPal APIs bring to the table for application designers, and laid out the details of the challenge.
James Turner: In the last week or so, you’ve released new API. Can you talk a little bit about what’s different with them, in comparison to how people have interacted with PayPal in the past as developers?
Naveed Anwar: We have always had APIs to help our developers at PayPal. The difference is that all the original APIs resulted in actions on PayPal.com, you had to access the web check out flow on our website. On November 3rd we announced the first ever truly open global payments platform. Part of that announcement was new APIs that let developers build PayPal’s payment service into their applications. We made the adaptive payments APIs available to everyone and gave attendees who attended our conference access to other APIs that make it easy to create user accounts (individually or in batches) within a developer’s application. We’ve had an overwhelming response from our developers to these Adaptive Accounts APIs, and so we decided to open them up to the rest of the community as soon as we could.
Very briefly, Adaptive Payments Platform has a lot of core features. In addition to the traditional features like send/receive money in P2P and B2B market segments, the Adaptive Payments Platform APIs provide new ways to make parallel and chain payments, and pre-approvals with PIN authorizations that enable several new possibilities. To provide a better user experience for both our customers and merchants, the Adaptive Accounts and Authentication APIs provide ways to make the account creation process contextual and allow merchants to authenticate their PayPal customers as part of their own order management or account related flows. These are just a few very high level sets of APIs that enable new capabilities and uses of PayPal’s payment service.
James Turner: So most people are familiar probably with PayPal as a third-party payment mechanism; that you go to a site, you buy something and then you get redirected to the PayPal site. What new functionality does this bring into that picture?
Naveed Anwar: Well, what you describe over there is a very typical merchant flow where someone wants to create PayPal as a payment mechanism. And once they are about to complete their transaction of the shopping cart experience, they click on a button which they come to a PayPal site and basically helps them complete a transaction securely by providing or confirming the payment method, shipping address, etc.That works really well for all the usual web checkout cases, but it is limited to web checkout. It does not make it easy to use PayPal in other non traditional cases – disbursements for example. That’s why we announced the adaptive payments APIs. We have now extended the capabilities even further with new Adaptive Accounts and Authentication APIs that enable even greater functionality. For example, if a user doesn’t have a PayPal account, the merchant can now prepopulate the customer data they’ve already collected and all the user will need to do is confirm the data and setup his/her account password and security questions. This gives a better user experience to their customers and reduces the friction for commerce transactions.
James Turner: So most developers have probably at some time in their life had to integrate in with a credit card processing system. What do you see the real ease-of-use or value-add on a developer perspective for using PayPal instead?
Naveed Anwar: Put simply, scalability and cost. We take the headache of payments out of the equation. Developers can focus on what they do best and we do the rest. We also give them instant access to the millions of people who use PayPal. It’s about removing the barriers that developers have had in the past of actually trying to think of coming up with a payment solution, and giving them the set of tools, which lets them concentrate on the core experience of the application versus trying to figure out how are they actually going to get payments integrated; how can they come up with a payment mechanism; what are the rules and regulations needed to set up a payment system. All of those headaches are taken away from the developers and merchants. And that is where the solution from PayPal comes add value.The other biggest advantage that I see is that as you look where the industry is moving towards, it’s really focusing around digital goods as well as mobile. There isn’t any platform out there which supports cross-border transaction and cross-border ability to pay anyone and receive goods. I see a lot of movement of goods which are actually created outside the US and then shipped over to the US as well as digital goods such as video games where a lot of the development community is out in Southeast Asia. In particular, you have developers setting out in India, China, as well as Singapore where someone wants to buy a quick experience on a digital good, be that a game on Facebook, be that a game in some other social networking environment. And that ability of PayPal, where we support 190 countries and 24 currencies, is something that no one else has been able to offer. We’ve done a lot of partnerships with a lot of banks and extended the reach. And that is the real value proposition of someone who integrates with PayPal X. From the very first day, you become global in nature. And with the scale of things which move these days across the globe, PayPal fits very beautifully into this as a solution for the community.
James Turner: One of the big hopes in the community has been to see micropayment become more feasible. Traditionally, the sub-dollar transaction level just hasn’t been economically feasible because you get killed by the per transaction cost. Is this going to help people out?
Naveed Anwar: Absolutely. I think as the platform opens up more APIs — I mean we did do a very brief announcement around new pricing, which will be available next year. And we’ll make an announcement on what date it’s available, but going down to a flat transaction model for goods moved across in certain areas. But the real thing which I look over here is that as they’re looking and working with our community, we’re trying to mold our roadmap based on feedback from the community. So a lot of times, you’ll have companies out there talk about like, “We can offer you a certain amount of feature sets and we’ll work with you.” But really, no one actually reserves the road map to work with the community.
In the case of micropayments, as in the case of other APIs, we’ve been hearing a lot of feedback from the community. What we announced on November 3rd was that we’re reserving 30 percent of the roadmap based on direct feedback from the community where they get to vote on certain features. And based on the ranking of the community, we will put them into our roadmap and release them. That is one of the things that we heard loud and clear, that they wanted a micropayment solution. They wanted to see new pricing. And we touched a little bit on that on November 3rd. And early Q1, we will be announcing when that pricing will be available to the rest of the community.
James Turner: One of the things we’re seeing as PayPal matures and expands is a lot more of PayPal as almost a financial institution. As you become more of a generic payment methodology for sites and other institutions, what kind of assurances are you going to be able to bring to the end users that things like fraud protection and challenges to charges are going to be easy for a consumer to do?
Naveed Anwar: So I’ll take a step back for this one. Security comes to the core of what we do. We did not open up the platform until we could be sure that we could make it easy to use for both developers and consumers; and secure. Our loss rate due to fraud is a third of one percent – that’s incredible. – and our systems get better with every single transaction that we do. We realize that we can’t mess up, not even once, because we are dealing with people’s money.Anytime you deal with the complexity of moving money, the fact of risk management, the fact of fraud management comes in majorly. We’ve spent the last three years looking at all of the possible avenues to make sure that we are building out the safest and most secure platform possible which we have opened up to the developer community by making sure that we’re building the appropriate risk models in place and building in the appropriate fraud models in place. That’s something that we take very seriously.
That said, PayPal has been doing this for quite some time. For the last seven years, if you look at the PayPal history of being able to be the number one P2P, person-to-person payment solution, and then three years ago when we launched our merchant services program, the fastest growing merchant services program accepting PayPal, the fact that we moved more than $2,200 a second through our pipeline into 190 countries; over 24 currencies gives me quite a bit of assurance that what we are trying to build out over here is not just safe and secure, but it’s also keeping in all of the models of risk that we know of to date as well as building a mechanism to anticipate things which might be hitting this industry and building a good set of resources behind it.
James Turner: You have, right at the moment, a challenge going on for your developers which I believe is going to end this week. Can you describe a little bit about what that’s about and if there’s still time for people to get involved?
Naveed Anwar: Absolutely. The last day for people to actually register, which is basically giving your idea of what you want to submit for participating in the competition, is December 16th. Now that said, there’s always that possibility of extending that deadline because a lot of people have been asking for some time. But December 16th is the current deadline for which people can submit an idea. There are two prizes. The first prize is $100,000 in which $50,000 is a cash price and $50,000 in waived PayPal fees. The second prize is $50,000: $25,000 in cash and $25,000 in waived PayPal fees. The challenge is simply to encourage developers to come up with an idea for an innovative application that uses our APIs, and let the community basically vote on it. So the first set of ideas, once they are submitted, are going to be opened up to the community to vote on. And from that, a set of finalists will be selected which will be judged by a panel of judges from PayPal and across the industry which are listed on our rules and regulations site. And from there, the winners will be announced. We’re shooting for them to be announced at the Demo conference coming up in March.
James Turner: Obviously you don’t want to give people, “Here’s what to do to win.” But in your mind, if you had to come up with one interesting application that people could use as an example, what would you think something you’ve thought of would be?
Naveed Anwar: Again, like you said, I don’t want to push people in a particular area, but really looking in ways on how we can solve the problem of transactions on mobile devices is something that excites and interests me a lot, if people can think around those areas. A couple of examples that I can share that people have already built applications on include a company called Fundrazr that was launched at TechCrunch. Fundrazr provides a Facebook solution for setting up fundraisers for any particular cause and enables people can contribute online on the web. They have used our Adaptive Payments APIs as the solution for their online funds utilizing parallel and chain payment methods. So those are the kind of ideas that we’re looking for. Something very creative, something out there which people want to solve for and can be innovative around it. So that would be something that I would suggest people to look in, particularly the mobile area.
James Turner: If I’m a developer and I’m considering doing this, I haven’t actually had a chance to look at the APIs and the platforms, what would my choices be as far as languages, as far as platforms?
Naveed Anwar: We have SDKs and code samples available in variety of languages and platforms. Java, .Net, PHP, Ruby are a few to name. But that said it doesn’t limit only to those languages and platforms – given that the APIs are really simple Web Services based on HTTP/SOAP/NVP, any one can use our APIs from any platform and language that they feel comfortable writing code in. I think you’ll find a lot of examples available in those out over here. But, again, not to limit anyone. We’ve got sample code available on X.com. That is our developer portal where you find sample applications, our documentation APIs, SDKs, and all of the things that you need to get started on one single destination. So I encourage developers to spend a little bit of time thinking about their idea and then looking across some of the high-level documentation before they actually sit down coding.
James Turner: So just to finish off, obviously you’re talking about a fair amount of money even for a company as big as PayPal. What is it that makes you want to kind of spark this kind of interest? PayPal, in a way, is a big enough brand that you don’t really need to introduce people to the brand. Why do you need to run this big promotion?
Naveed Anwar: It goes back to the basics which I started off with, in that we can probably come up with solutions and think of use cases for one or two or three or four ideas. If you look at the whole global scale of ecommerce available, it is a huge business but it pales in comparison to the $30 trillion opportunity in payments.And we want to be the platform of choice for anyone looking to create an application that includes payment. if we could actually facilitate the community out there who are building applications Wow. — When Facebook opened up their platform, it allowed people to work in that particular environment, in the Facebook environment. When the iPhone opened up their platform, they allowed people to work in their environment which was build the applications on the iPhone. What we are looking to do is take PayPal to wherever the developer NEEDS payments. We are not limited by one particular area. We go into the enterprises. We go into social networking. We go into all the places where payment as a solution is needed. And if we can actually reduce that barrier of entry — because at the end of the day, when anyone is building out a business and anyone is building out an application, they’re looking at ways of monetizing it. Traditionally, the ways to monetize is to take click-through or inserting ads, but really not a mechanism in which people can actually get real money coming to their account. That’s where PayPal comes in.
From a brand perspective, I think if you look at what PayPal started off with, it was kind of like four failed business models and the fifth business model was the ability to send money to each other, and through a demo which was going from one Palm Pilot to another Palm Pilot. So doing and working from a demo point-of-view where the developer community goes back to its roots and we really wanted to go back to our roots and work directly with the community. Hence, the reason — the push around X.com, bringing back that domain, using that for the community, as well as looking at ways in which how the community can give us feedback on the 20th or the 30th use case for which I cannot think internally, but someone out there already has a problem and they want a solution. We want to work with them to have a solution for them. What do I get out of all of this? It’s that when someone thinks about writing an application, be that in an offline mode or an online mode, and they want to think about integrating payment transactions as a solution, I want their day to start at X.com and finish at X.com. That’s my ultimate goal.