PayPal offers secure way to shop non-PayPal sites

By Eric Auchard

SAN FRANCISCO (Reuters) - PayPal, the payments service arm of online auction leader eBay Inc, is set to release on Tuesday a convenient way for its customers to make payments on Web sites that don't accept PayPal directly.

The new software utility, called the PayPal Secure Card, recognizes when a user lands on an e-commerce checkout page and automatically helps the user fill out the payment form in a secure way that also offers stepped-up fraud protections.

It answers an innovation by Google Inc, which a year ago introduced Google Checkout, which stores financial details to make shopping more convenient, analysts said.

Through a partnership with credit card issuer MasterCard Inc, Secure Card generates a unique MasterCard number each time a PayPal user arrives on an e-commerce sales checkout page that does not otherwise accept its payments.

"From a merchant's perspective this looks like any other MasterCard transaction," said Chris George, director of financial products for PayPal. "And it's just another PayPal purchase to the customer."

Secure Card has been tested by 3 million PayPal customers in the past year. The plug-in will be available to U.S. customers on Tuesday, with international customers to follow.

When a PayPal customer wants to pay for something on a site that doesn't normally accept PayPal payments, users click a downloaded PayPal button on their browsers to generate a unique, single-instance Secure Card transaction number.

"Actual PayPal activity goes up," George said. "It makes sense, because it just makes shopping easier and safer."

By residing on the PayPal user's computer, Secure Card can detect when users visit e-commerce sites. The software then automatically fills in their stored financial information, requiring just a few more clicks to authorize a transaction.

PayPal stores no details on the local computer for security reasons. Instead, it logs Secure Card activity in the user's account on central computers for safety and record-keeping.

Secure Cards work on Windows computers running either Internet Explorer or Firefox. Users of Apple's Safari browser have only partial access to the service for now, George said.

Red Gillen, an analyst with financial services research firm Celent, said the new service makes PayPal useful on e-commerce sites across the Web, not just on online merchants that have embedded PayPal technology into their own sites.

"This is really the way to complement those Web sites that don't take PayPal already," the analyst said.

Usage of PayPal on the Web at large is growing at nearly twice the rate that it is on eBay and the new service will help further accelerate this growth beyond the tens of thousands of merchants who already accept PayPal payments.

In the third quarter ended September, transactions through Web merchants grew 61 percent to $5.38 billion from a year ago, while overall PayPal transaction volume grew 34 percent to $12.22 billion over the same period.