PayPal plugs in Azure, woos developers

...and billing functionality. It took only two days to integrate it into the existing product, Khalidi said.

Khalidi said that Microsoft plans to offer a simple way to build PayPal's mechanism into hosted applications as part of Azure's full release later this year.

Michael Ivey, chief executive and co-founder of TwitPay, also took the stage to show his company's use of the new PayPal API — specifically to let people pay multiple people at once. "In one transaction, I'm paying four different people," he said. Before the new APIs, the service would require users to make each payment as its own transaction.

Sites already using the new API include Webassist, GroupCard, Lottay, Rainfall of Envelopes and MedPayOnline.com.

"PayPal will help you get paid for your innovations — your business will become our business," Thompson told the developers. "We view you as our third set of customers."

New features
The new payment service has a handful of new features designed to make it easier for developers to make money with their applications and services.

Thompson said that even if developers were acting as an intermediary between the person sending the money and the recipient, they would now be able to take their cut of that transaction — just as PayPal does.

Part of getting that to happen involves a new API that lets developers create peer-to-peer and business-to-business money-sharing applications. They can now also split up payments into several transactions and let users authorise a payment after the transaction has been made. Those two mechanisms can speed purchasing, regardless of whether the buyer is ready to pay the full amount at the outset.

As part of the new platform, PayPal also is changing the way fees are charged. Application developers can choose to have the sender of the money, not just the recipient, pay the fee.

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In addition, the fee rates can be changed based on the type of purchase, which should ease the chore of handling both high-value transactions and micropayments (transactions below $12) within the same application. As it stands today, PayPal currently requires sellers to have two different accounts open, one for bigger payments and another for micropayments, and each has different rates.

People use PayPal today through a web interface, but a new API will bring PayPal to non-traditional computing platforms including mobile phones, set-top boxes, and gaming consoles. That is important, given that those devices are increasingly networked and have their own ecosystems of applications. And moving to a browser can be disruptive to a user who just wants to make a quick payment.

Using PayPal that way also means a developer must build the necessary user interface, however. PayPal did not provide specifics on that element of the new payments system.

Overall, Thompson said the new payment system will help PayPal keep pace with changes in technology and business. "The pace of innovation is just staggering," he said. "And the next wave of innovation is poised to move that much faster."

CNET News.com's Ina Fried contributed to this report.