For PayPal, eBay represented approximately 8% of PayPal TPV (Total Payment Volume) in Q4 2019. They are expecting to lose a quarter of this down to approximately 6% of the overall PayPal TPV by the end of Q2 2020.
What PayPal TPV from eBay transactions will remain after July 2020
This may be in part attributed to eBay’s rolling out of eBay Payments and partly due to growth in other areas of PayPals business. However, as of July 2020, PayPal’s five year operating agreement with eBay comes to an and but this doesn’t mean PayPal will automatically lose all of the TPV from eBay – a good chunk of it will remain.
PayPal branded transactions
From July, PayPal will continue to process all transactions in which the PayPal wallet is the selected funding source, whether or not the merchant has opted in to eBay Managed Payments.
Starting in July, unless and until a merchant opts in to eBay managed payments or if eBay force merchants to migrate, PayPal will continue to process all payments funded outside the PayPal wallet (e.g. when a buyers opt to pay by credit or debit card).
PayPal ‘take rate’ (fees) after migration to eBay Payments
Once a merchant opts in (or is forced to migrate) to eBay Payments PayPal’s take rate on PayPal branded transactions will decrease. PayPal say that eBay will enjoy ‘a rate that is commensurate with a large merchant’.
What fees eBay will pay haven’t been revealed, but it’s reasonable to assume as in the past some large merchants have enjoyed PayPal rates as low as 1.9% that eBay will have negotiated a rate at least this low. However it’s equally possible that they’ve negotiated an even better rate but the exact fees they’ll pay are likely to remain confidential.
With eBay offering rates of around 2.7% for eBay Payments in the US, this would suggest that they have the ability to make significant margins on payments hence it’s no surprise that they are viewing it as a $2 billion revenue opportunity with a $0.5 billion profit.
The important part to remember for merchants (apart from waiting to discover exactly what rate will be imposed) is that the day you migrate to eBay Payments every buyer who wishes to will be able to continue to pay with PayPal. However they will also have the option to use additional local payment options including alternatives such as Apple Pay and Google Pay.