eBay dropping PayPal as one of their main payment providers

eBay dropping PayPal as one of their main payment providers

At this point, it is no secret that one of the world’s largest online marketplaces, eBay, will be replacing PayPal as its main payment processing provider. eBay had purchased PayPal back in 2002 and ever since the two organisations had remained tightly linked. PayPal was the main platform that processed payments for eBay. Now, this will change.

ebay paypal

With the fast growth and acceptance around the world of PayPal as a strong e-commerce payment option and PayPal being the preferred payment method for most customers who buy and sell on eBay, many may be wondering why eBay would do this.

It’s all about Customer Experience

PayPal is one of the most convenient and easy-to-use payment platforms. While used by many, ultimately customers want choice, and many want to be able to easily use their preferred local payment method.  And when customers can use the payment method they like and trust with ease, they tend to convert more, at least in theory.

By replacing PayPal with a customised payment service, eBay will be able to provide a smooth checkout process customised for the local habits of buyers in all markets in which it operates. That will be a significant improvement for eBay users who are coming from many different countries and, therefore, have different habits and expectations with regards to payments.

There’s another important aspect to keep in mind – by taking ownership of the payment process, eBay will be better able to meet shoppers’ preferences and drive more business for the company as a result.

So who’s going to replace PayPal?

Adyen.

Huh?

I won’t blame you if you’ve never heard of Adyen. It’s an Amsterdam-based payments company that was founded in 2006. It has counted global companies like Uber, Netflix and Spotify among its customer base. And eBay have just signed a long-term contract with them.

Adyen’s business is solely focused on providing back-end payments services, like credit card processing, to businesses, so you won’t see any Adyen payment buttons pop up on eBay. But, Adyen will become the primary payment processor for eBay sites across the world.

After the existing eBay-PayPal agreement ends in 2020, PayPal will remain a payment option for shoppers on eBay, but it won’t be prominently featured ahead of debit and credit card options as it is today. PayPal will cease to process card payments for eBay at that time.

What does this mean for the end-user?

There are some obvious advantages to replacing PayPal with a comprehensive payment solution. Beyond enhancing the customer experience and likely winning more business and controlling the process so it can better serve not only itself but buyers and sellers alike, eBay will also be able to build a business model out of the payment process.

Since PayPal provides a global payment method it adds a lot of service and value which explains the high fees involved. The fees of local payment methods are typically much lower than PayPal’s. As a result, eBay will probably be able to provide lower payment fees to its sellers and still secure a margin for itself in the process given its large volume.

Long story short – at least in theory, fees should be lower, which is a win-win situation for both eBay sellers and buyers. The transition is expected to be smooth, but we’ll see how this will work out.

What will happen to PayPal?

Well, eBay have said that PayPal will remain “an important partner,” with a deal keeping the service as an option to make purchases in the marketplace until July 2023.

PayPal’s expected bright future despite the shift at eBay shows us, that convenience and trust is still going to be key when it comes to retail payments.  Those payment brands that make things easy for customers and that they have confidence in will be the ones that help retailers win in the battle for conversions.  And those will include options like e-wallets from PayPal, AliPay, MasterPass, and WeChat. These are in addition to the tried and true options like domestic credit cards.

The transition

It will be business as usual for sellers on eBay during the transition process. However, eBay says that sellers should expect to provide them with “some additional payments-related data and transition to a new relationship with eBay that includes integrated payments capabilities”.

The company says that sellers will be required to complete these steps in order to continue selling on eBay. This won’t happen immediately, but eBay expects that the transition for sellers will occur prior to July 2021.

As such, with an estimated 25 million sellers on eBay, this transition will take some time to complete.

Conclusion

We think that this could be a giant step forward and a huge leap for both eBay and PayPal. A future with lower fees and more flexibility is something to really look forward to. We can say that we’re really excited to see what the future will bring us.

 

 

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