Pioneering online payment site PayPal was once an independent entity. Then eBay bought it for a cool billion and a half dollars in 2002. It seemed like a perfect fit, since many eBayers used PayPal as their preferred payment method for their purchases. In concert, transactions became nearly seamless.
by Richard Pachter
Though it was spun off in 2015 per the demands eBay’s largest shareholder Carl Icahn, it remained in its preferred perch under a five-year agreement with its former parent. But it looks like that will, too, be coming to an end. PayPal had also been handling back-end payments for its former parent but that, too, will cease.
Netherlands-based Adyen will now replace PayPal as eBay’s primary partner, though PayPal will continue to remain an option for eBay buyers upon checkout, at least for now.
"After careful consideration, we believe that we can offer a more seamless experience while giving buyers and sellers more choice for payment and payout options," eBay President and CEO Devin Wenig said during eBay's quarterly earnings call.
Though it doesn’t seem like great news for PayPal, its CEO kept a brave face.
Chief Financial Officer John Rainey told TheStreet.com "This was completely anticipated as part of the natural evolution of the agreement we had with eBay. This was not unexpected for us. It was planned for in our financial performance and included in our guidance and it does nothing, nothing to change the long-term earnings profile for this business," said Rainey. "The operating agreement that we had with eBay allowed for a five-year transition period and there were certain restrictions for both PayPal and eBay during that five-year period. For PayPal, we were not allowed to go partner with some other named marketplaces in a completely sort of unfettered way. There were restrictions on how we could partner with them. For eBay there were geographic and volume limitations for how they could use another payment services provider."
Ayden of course, is ecstatic. CEO and co-founder Pieter van der Does told CNBC:
"We are thrilled that eBay, one of the most successful e-commerce companies of all time, has chosen Adyen as its new, global payments processing partner. Adyen is uniquely positioned to meet the needs of high volume global marketplaces like eBay. We look forward to powering transactions on eBay, starting in North America, and supporting their continued global growth."
It remains to me seen if PayPal is able to leverage its newfound freedom to forge fresh alliances. Amazon, for example, has consistently refused to accept it for purchases, no doubt due to its eBay connection. That, among other things, may now change.
Richard Pachter is Editor at Large for The Wise Marketer