PayPal dances with developers to drive innovation

November 4, 2009

Back in July , following a discussion with Jeff Carter (who is back in Australia for this month’s Innovative Marketing conference), I asked : What if a bank were to open up development of applications to others in the same way Facebook does?

The discussion Jeff and I were having revolved around the future-proof bank, and what banks will need to do to ensure their offering doesn’t become commoditised.

Not long after, PayPal, a business that has done a great job taking market share from banks around the world, announced it was planning to open up its platform to third party developers.

Launched officially this week at PayPal’s first developer conference in San Francisco, the Adaptive Payments API allows developers to build applications that enable payments from PayPal account holders to anyone with a web presence, be it a mainstream retailer or someone with a widget running on their Facebook page to collect donations.

At the launch, PayPal president Scott Thompson made an important acknowledgement: “The whole world is going digital, and the future of how we communicate, how we get information, and even how we transact, is in the hands of developers”.

Mint.com founder Aaron Patzer, who I spoke to following the sale of his business to Intuit, says, banks will always face a challenge getting the best talent to help build the best platform. “No developer, programmer or user interface designer out of school or, say, Apple, is going to go work for Citi or Chase. They want to work for Google, Mint or Apple.”

But what if you could tap the collective wisdom of freelance developers that wish to remain independent? PayPal is banking on this strategy, today announcing plans for an inaugural Australian developer program, kicking off in January 2010.

PayPal says the competition will challenge the Australian developer community to create the most innovative payment application using Adaptive Payments. It says the winner will receive a “substantial cash prize” to help them commercialise their application.

The move comes at a time when innovation in Australian payments is arguably at an all time low. So much so that the Reserve Bank is threatening the industry with regulation in order to get some movement.

PayPal may not be able to provide the answer to system innovation, but the concept of harnessing talent outside the organisation deserves more attention from the banking industry.

What do you think? Are we moving into a world where developers will hold more power? Is it realistic for banks to open up development of some applications to outside parties, and can their vendor partners play a role in doing this?