When we’ve been talking talking in terms of the eBay PayPal split and eBay launching their new eBay managed Payments solution, we’ve largely considered things from the eBay side of the story. eBay see payments as being a massive money spinner as they intend to take an additional slice of GMV in payment processing fees on top of the normal eBay selling fees.
eBay are being held back in their roll out of eBay Payments by the five year eBay PayPal split operating agreement they signed with PayPal when the two companies split. Currently eBay are only able to divert 5% of GMV away from PayPal and only operate eBay managed Payments in one country. From July that doubles to 10% of GMV in two countries. Bearing in mind that eBay want to scale payments to be a $2 billion annualized revenue and $500 million annualized operating income business unit one might think they were chomping at the bit to get going.
However it might be that PayPal are more keen to ditch eBay than eBay are PayPal. PayPal as the other signatory of the eBay PayPal split operating agreement promised to give eBay it’s most favourable terms compared to marketplaces eBay consider to be competitors and that’s preventing them from signing the type of deal that they’d like to with other businesses. Like eBay, PayPal get considerably more freedom to do business the way they want from July 2020 when the operating agreement comes to an end.
“Once we are sort of freed of those shackles next year, it gives us an opportunity to go do things with some of these other marketplaces. It just gives us a freedom that we didn’t have before.”
– John Rainey, CFO, PayPal, via Business Insider
Exactly which marketplaces PayPal are eyeing up remains to be seen although they’ve admitted to wanting a deal with a ‘large Chinese marketplace’ and already have deals with the likes of Facebook and Instagram. And of course in the West that is the giant Amazon which has to be a desirable target for PayPal if they can get their foot in the door.
PayPal’s calling card is the temptation of 277 million users – which was up 17% in the first quarter of 2019. That’s a potential bucket load of buying power from consumers to offer a new marketplace.
What does this mean for merchants? Well eBay will still allow buyers to pay with PayPal but the funds will go through Adyen and eBay Payments but you already sell on eBay. Where your real interest should lie is to watch which marketplaces PayPal signs deals with and jump onboard as swiftly as you can. PayPal will take customers with them but you’ll also attract new customers and they’ll be able to pay via the PayPal payments you’re already accustomed to accepting.