How Small Business Caused the PayPal-eBay Split
February 12, 2018
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After 15 years, eBay is dropping PayPal as its main payments processor.
Their contract will play out until 2020 (or 2023 depending on who you ask). Users can still reportedly use PayPal as a payment method on eBay until then.
Many saw this coming, but, it’s still surprising to see one of the world’s most popular payments platforms replaced by an unknown Dutch company like Ayden.
The move has left people wondering why and how PayPal fell so far out of the favor of one of its first major partners.
A big reason that nobody’s talking about is small business.
eBay’s annual B2B sales reached $4 billion in 2016. The company projects the B2B ecommerce market to jump from $780 billion in 2015, to $1.13 trillion by 2020.
Conveniently, their contract with PayPal will expire by then.
Both eBay and PayPal are working to enter the B2B market, and how they’re doing so could be at the crux of their breakup.
Long Story Short
eBay’s reasons for dropping PayPal vary, but the main reason seems to be cost-effectiveness.
The company projects it will add $500 million in operating profit after their contract with PayPal expires.
Not only will investors benefit, but eBay is selling the Ayden partnership as a benefit to its users and businesses as well.
Ayden is currently the back-end payments processor behind Netflix, Spotify, and Uber. These platforms boast an easy-to-use and cost-effective payments system
Ayden is currently the back-end payments processor behind Netflix, Spotify, and Uber. These platforms boast an easy-to-use and cost-effective payments system, something that eBay hopes to achieve.
eBay is selling this move to customers through savings in payment processing. They foresee sellers experiencing a sizeable reduction in these costs because of the partnership.
Another reason is PayPal’s underwhelming projected numbers going into 2018. Though the company finished 2017 fairy strong, the coming year isn’t looking so great.
Though the company (PayPal) finished 2017 fairy strong, the coming year isn’t looking so great. Many analysts attribute this to the rising number of fintech startups and international payments methods that offer cheaper, customer-oriented services
Many analysts attribute this to the rising number of fintech startups and international payments methods that offer cheaper, customer-oriented services.
While PayPal’s relatively new P2P payments service, Venmo, is doing quite well, eBay seems to have other plans.
Small Business, B2B
In 2016, eBay introduced Business Supply, a B2B exchange platform “offering the broadest assortment of inventory, the best value, and a seamless buying and selling experience.”
The hope is to help businesses navigate the pain-points of buying and selling such as trust, financing, and ease.
Currently, the payments process for eBay users is clunky and time-consuming.
Buyers and sellers, individually or as part of a business, are forced to leave the website, and create a PayPal account if they don’t have one already. The system isn’t integrated and gets even more confusing if you’re ordering wholesale.
PayPal only allows users to send up to $10,000 at one time, even for businesses. The international payments provider simply isn’t geared toward ecommerce at that scale.
As eBay looked to take advantage of the expanding B2B market, PayPal looked more and more like a hindrance than a helping hand.
Since dropping the payments giant, eBay’s stock has jumped as high as 15%, while PayPal’s has dropped by the same margin.
Though PayPal’s future in Venmo looks bright, the cracks are starting to show, especially for international businesses. The company simply can’t provide sufficient services to make its customers’ lives easier or more cost effective.
With the rise of companies like Veem, you’ll start to see less of PayPal.
Veem is a global payments solution helping small businesses work internationally.
Our innovative platform takes the stress out of global transfers by charging no hidden fees, and providing unmatched customer service.
Veem’s payment tracking dashboard makes it easy for businesses to locate their payments wherever they are, and our team will even verify your intended receiver to avoid any issues.
What’s not to love?
Try Veem today and take your business payments in your own hands.