This afternoon Facebook announced a partnership with PayPal in which users can now pay for their Facebook Credits using the payment provider. Since rumors first began about the expansion of Facebook Credits, many assumed that it would eventually become a direct competitor to PayPal. Today’s announcement suggests that this is not the case.

Instead, Facebook will continue to integrate Facebook Credits into their platform, making it a payment provider for virtual goods. So next time you check out at your favorite e-commerce provider, don’t expect to check out with Facebook Credits. Instead, Facebook will remain focused on the smaller transactions like purchasing gifts for your friends’ birthdays.

Building a world class payment solution clearly has its challenges (fraud, etc), which makes this a natural partnership. Facebook has enabled users to make purchases within their platform, however building up a anti-fraud team to a level in which a large percentage of online transactions are running through the system is extremely expensive.

With PayPal founder Peter Thiel on the board of Facebook, one can only imagine that the company thought long and hard about the best payment strategy. Facebook has already tested out other payment solutions (such as Zong), however the ability to pay for virtual transactions through PayPal is massive considering PayPal’s more than 81 million accounts.

Below are screenshots (which are currently drafts) of the new integration.