Facebook to use PayPal for virtual transactions

Facebook is adopting PayPal as its payments system.

This move enables 400 million users of the social networking site to use PayPal to purchase Facebook credits, the virtual currency that can be used for various transactions at the website.

Companies such as Zynga and Playfish sell virtual goods to users who play games such as Mob Wars and Restaurant City. Advertisers will also be able to use PayPal, the ecommerce site that allows payment and money transfers, to buy advertisements on the social networking site.

Facebook is testing the use of credits within games and other applications. By allowing users to pay for in-game purchases with credits, Facebook provides users with an online wallet. It may take a small commission on the payments. These credits could also be used for buying in online retail stores such as BestBuy, Sears and 1-800-Flowers on Facebook.

PayPal, owned by online retailer Ebay, will also attract advertising revenue. It gets a commission on each transaction and will now get a slice of that revenue.