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EBay Has Dropped PayPal After Years Collaboration

The gifts really start to improve in the fifteenth year of marriage. But just when the online auction site and marketplace should be showering each other with brand-new, unopened crystals, PayPal has decided it’s time to move on.

    In a move to partner with a younger model, Adyen, eBay announced yesterday that it would not be renewing PayPal’s contract to provide the back-end services. Most people won’t be familiar with it, but a Dutch company that made $178 million in profit in 2016 is planning an IPO this year. Although that sounds encouraging, it’s important to keep in mind that PayPal made $11 billion during the same time period.

    Devin Wenig, CEO of eBay, told analysts, “We think we can offer a more seamless experience while giving buyers and sellers more choice for payment and payout options.

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    The company added that “PayPal will cease to process card payments for eBay at that time,” adding that “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.”

    Adyen will offer those alternatives instead. Although you won’t notice any Adyen logos, they will be handling the payments in the background. PayPal is out and Adyen is in, and Recode speculates that eBay may have agreed to some sort of equity stake as part of the deal, but the company hasn’t made any public comments about the specifics.

    Naturally, eBay once owned PayPal after purchasing it for $1.5 billion in 2003. It outgrew its capacity by 2015 and was spun off into a separate business. Given that eBay is now worth $42 billion compared to PayPal’s $102 billion, that seems like the right decision.

    Despite a 10% stock decline following the announcement that eBay was going its own way, PayPal is still doing quite well. Additionally, as PayPal executives stated to The Wall Street Journal, the company no longer really needs the website. According to the Journal, “Executives added that PayPal’s eBay volume was growing more slowly than its non-eBay volume,” and they cited recent agreements with Disney, Dillard’s Inc., and QVC as significantly softening the blow. Even though eBay’s rejection is a bitter pill to swallow, a profit growth of 59% in the final quarter of 2017 would suggest they’re correct on that point.

    Given how seamless using PayPal was already, that is probably not the full picture. PayPal will continue to be a payment option, but it will be out of the way and hidden, perhaps in recognition that eBay’s power users are perfectly content with the way things are right now:


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