eBay to Discontinue PayPal as Main Processor

February 9, 2018

After 15 years, the eBay-PayPal partnership is coming to an end. The e-commerce giant has announced that it will replace the payment processing company it purchased in 2002 for $1.5 billion with Adyen (commonly misspelled as Ayden). The news caused eBay’s shares to rise to a record high while its long-time partner took a hit.

Adyen (or Ayden) is a smaller start-up formed in the Netherlands. This online credit card processing company offers backend payment services for businesses that include payment processing and credit card machines. With it offers point-of-sale credit card machines, online transactions are at the heart of the Dutch company, which already works with tech giants like Netflix and Uber. The company was last valued at $2.3 billion and there have been rumors that it will go public.

PayPal, on the other hand, is one of the world’s most well known and most established credit card processing companies, although it has faced growing competition in recent years. eBay’s ownership of the company ended in 2015. After the spinoff, the processing company was valued at $50 billion — a figure that is now more than $100 billion.

So why has the e-commerce giant made such a move to end this partnership? The company’s strategy is transitioning to full payment intermediation. It plans to integrate the Dutch company’s payment processing for lower costs and greater control for the company’s merchants.

With the new partnership, eBay merchants will have a central view of their information through the company’s merchant services. They will also be able to track and manage all customer interactions and transactions with greater ease. The company says the move will reduce costs for sellers.

Customers will not interact directly with Adyen’s system. With the new merchant services, customers can pay in 150 different currencies with more than 200 unique payment options. Buyers will no longer get directed to a third-party payment system to complete a purchase.

Most payments on the e-commerce giant will be processed by the new merchant services provider by 2021. Customers can still use the existing system until 2023. The shift will begin gradually in North America this year.

PayPal shares may be down on the move as the e-commerce giant is a big part of the payment processor’s business, but these transactions have not been growing as fast as other areas of the processor’s business. The e-commerce website accounts for about 13% of all payments handled by the processor in the fourth quarter, a decline from 16% last year.

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