EBay Makes Way for Adyen: PayPal Loses Its Position as Choice Provider
EBay and PayPal are parting ways soon as eBay is planning to work with a smaller European company for processing payments. The company eBay has chosen is none other than Adyen, which eBay plans to phase in as its primary provider. The move allows eBay to intermediate payments and to take control of payment flow.
One of the main goals of the company is to smooth the transaction process for sellers and buyers. Adyen helps in the simplification of the end-to-end selling and buying experience. With Adyen’s services, buyers can buy on the same site without having to leave eBay to make payments. EBay has been making improvements to its platform, particularly since its split from PayPal in 2015. Now they are looking to streamline the payment transaction process to perfection.
Some sellers and buyers might have concerns about the change. Many trust PayPal solutions, and changing to another payment processing company causes discomfort. EBay promises to make the transition as smooth as possible.
EBay Seller Benefits:
Economic Control and Cost Reductions: The costs for processing payments will be lower. Pricing structures will simplify, and sellers will have greater ease in accessing funds.
One-Stop Online Business Management Solution: EBay is seeking to make business management easier. The goal is to provide a one-stop website for business control, that being the eBay dashboard. Sellers will be able to access payment details and track sales on eBay. This is a new step for the company. At present, sellers must go outside the eBay platform to manage transactions.
Because Adyen deals with 150 different currencies, eBay will gain a wider audience. Sellers benefit from eBay’s expansion. They can sell their wares and items with greater outreach. With more access to buyers, eBay promises greater conversions.
EBay Buyer Benefits:
Buyers benefit from additional payment solutions at the time of checkout. The checkout process will allow for eBay to manage the entire process. Buyers don’t have to leave the site to process payments through PayPal solutions.
The company gains greater control over every transaction. The streamlined process will help in retaining buyers and sellers. Also, eBay will eventually charge sellers for payment processing service solutions. It is expected to help make the company $1.2 billion in revenue.
Who is Adyen?
Adyen is a Dutch company with a name meaning “start over again.” The company was started in 2006 by a group of experts in payment technology. It is the same group who saw an opening in the industry for greater innovations.
Adyen set out with the goal to build a “friction-less, state-of-the-art infrastructure” for use with payment methods and card schemes around the world. The system allows businesses to accept payments from consumers. At the same time, it will allow eBay to make money from a single online system.
In 2009, the company signed on with Groupon. Since then, they’ve worked with the likes of Netflix, Uber, and Spotify, among others. Within five years in 2013, the Adyen platform had already processed $14 billion in sales. In 2014, that number grew to $25 billion, and a year later, that amount doubled to $50 billion. Pieter van der Does is the co-founder, President and CEO of the company. He was the former co-founder of Bibit before he got on board with Adyen in 2006. Armout Schuijff is the company’s other co-founder and Chief Financial Officer.
The History of eBay and PayPal
In 2003, PayPal became the primary transaction handler for eBay. It was only months later that eBay became PayPal’s parent company, after gaining the business at a cost of $1.5 billion; but, years ago, whispers of a split began to emerge. In 2015, eBay and PayPal split. Both were distinct public companies. At that time, there was a promise of the continuation of PayPal being the primary processor. A five-year agreement assured business well into 2020.
In 2015, PayPal’s earnings were from 30 percent of eBay’s sales. At one point, PayPal owed a good 50 percent of its profits to the famed buying and selling platform. Following the split, PayPal diversified its services. Currently, eBay is worth $42 billion, and PayPal is worth $102 billion. EBay has since announced that the mid-2020 agreement will be the end of the company’s reliance on PayPal.
EBay has now entered into an agreement with Adyen to take over as the primary processing company. The transitioning process will begin during the second half of 2018. By 2021, Adyen will be in a position to be the leading payment venue for the eBay platform online. Buyers will still be able to use PayPal services through eBay, at least through 2023.
Why Change What’s Working?
What’s at the root of this sudden switch? After all, eBay and PayPal have been synonymous since 2002. For eBay, the driving factor is a cost reduction in services. EBay cites giving sellers transaction tracking options a reason for the switch. The transactions will be manageable through the eBay site as a deciding factor. A merchant will no longer have to leave eBay and go to PayPal for tracking transactions. EBay feels the choice expands buyer options as well, by giving them more payment choices. The goal is to give buyers and sellers a seamless eBay experience.
Of course, eBay is always looking to expand. With the use of Adyen’s services, the company will have a larger global reach. Adyen deals with as many as 150 global currencies. The company can meet the demands of a worldwide marketplace. Thus, it has captured the attention and loyalties of eBay.
The announcement that eBay would be working with Adyen caused PayPal stock to drop. According to CNBC, PayPal’s stocks dropped 10% after eBay’s announcement.
Change in the Air
EBay begins the transition process this year, during the second half of the year in North America. Throughout 2019 and 2020, eBay will begin to expand its offerings, while remaining true to the PayPal Operating Agreement until it ends in 2020.
For die-hard fans of the PayPal platform, there’s nothing to fret over. PayPal will still be a buying solution available through eBay checkout. Meanwhile, the conversion to Adyen will not result in heavy changes.
Log in and listing management will remain unchanged. The dashboard will see eventual integration of Adyen payment solutions, and will include newer transaction tracking tools. Sellers may have to provide eBay with payment related information in order for eBay to enable payment solutions. The solutions will be available inside the eBay account and eBay will notify sellers when that happens. At this moment, sellers need to take no action whatsoever.
EBay made the official announcement on January 31, 2018.
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