In their latest quarterly earnings call, PayPal laid out some of their plans for a deep integration with eBay Managed Payments. They also said that the current tests have had no impact on their total payment volumes with eBay but still described the relationship in terms of a ‘softness in our eBay business’ and ‘ongoing pressure on our eBay marketplaces business’.
PayPal’s ‘softness in our eBay business’
“Merchant services volume was $127 billion, growing 28% on a currency neutral basis, and volume associated with eBay grew 3%. For the quarter, eBay related volume represented 11% of volume on our platform, down from 20% three years ago. This is a continuation of a multi-year trend and this quarter our merchant services volume grew more than 8x faster than our eBay marketplaces volume.”
– John Rainey, Chief Financial Officer and EVP Global Customer Operations, PayPal
eBay volumes going through PayPal are growing, but 3% compared to their merchant services which are growing at 28%. This is partly a sign of PayPal’s focus on growing their merchant services and it’s healthy for PayPal that eBay related volumes are significantly lower than three years ago. What is worrying is that the eBay growth that PayPal reports is just 3% – we’ll know more when eBay report their earnings for the last quarter at the end of the month.
Is the ‘softness’ down to eBay Managed Payments?
So far the eBay Managed Payments roll out is so small in relation to the overall eBay marketplace business that the $20 million or so that’s gone through eBay Managed Payments isn’t even big enough to be seen as a rounding error on PayPal’s balance sheet. The volumes from the early adopter sellers who volunteered to take part may sound a lot but in real times as a percentage of overall eBay transactions it’s insignificant.
“So first of all, eBay’s performance on our platform had nothing to do with intermediated payments. They announced publicly — I think they had 20 million of TPV that moved to intermediated payments, we don’t even see that as a rounding [error] on our results. So intermediate payments has just started off for them, no impact on their performance on our platform.”
– Dan Schulman, President and CEO, PayPal
How will the PayPal integration with eBay Managed Payments work?
PayPal might not yet be on eBay Managed Payments, but they will be and it won’t be as an afterthought but as a deep integration with eBay Managed Payments. eBay have already indicated that PayPal will be available from summer 2019 and PayPal confirm this having signed a 5-year term with eBay to display PayPal branded services on their intermediated payments.
PayPal have also got a a comprehensive 7-year deal to provide eBay buyers’s with PayPal credit offers.
More importantly, PayPal assert that ‘the sellers that eBay and PayPal share demand to have PayPal; their sales actually depend on it’.
The way that PayPal payments are collected on eBay will however be changing. It’s highly unlikely that when PayPal appears in eBay Managed Payments that buyers will pay sellers directly. What will almost certainly happen is that buyers will pay with PayPal into eBay’s account and eBay will place the funds into the seller’s eBay Managed Payments account. The immediacy of receiving money into your PayPal account and being able to buy eBay postage with it, spend it on eBay or other sites that accept PayPal, or withdraw it instantly to your bank account will be gone.
PayPal isn’t going away, but there are two lessons to be learned from the PayPal call – eBay business may not be growing as fast as eBay, investors, and sellers on the marketplace would like and that PayPal isn’t going anyway and will be back on eBay with a deep integration with eBay Managed Payments.
Want to know more about how eBay Managed Payments is performing from the seller perspective? Read our article published today titled The virtues of eBay Managed Payments (and the downsides)
