PayPal is preparing to launch a new payment system that simplifies the process of buying products from within an online application, The Wall Street Journal is reporting.

According to the report, the new service will be called PayPal X. It will allow users to sign in to their PayPal accounts and purchase products from within a respective application.

The service, which has reportedly been in limited testing, is eBay's best hope for capitalizing on the burgeoning in-app payment market, which has witnessed Facebook emerge as one of PayPal's strongest competitors.

According to The Wall Street Journal, Facebook's in-app currency, Facebook Credits, is now being considered by many developers that are lured by the social network's size and reach.

Sebastien de Halleux, chief operating officer of social-gaming company Playfish, told the Journal that his company is trying out Facebook Credits to possibly replace PayPal. He told the Journal that Facebook's service "can create a lot of value by reducing friction and allowing many more people to spend money." It also helps