eBay will eventually split with PayPal, so what are you going to do now?

Mia Steiber 1 February 2018 NEWS

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eBay and PayPal's current agreement ends in 2023. Here's what buyers and sellers need to know.

This morning in the fourth-quarter earnings call, eBay announced that it will split with PayPal. Before any eBay shopping devotees start to panic, the split won't happen until 2020. So we'll have another couple of years to get used to the idea. Even then, eBay and PayPal have align on terms around a new agreement that could see PayPal stick around until 2023.

In place of PayPal as the primary payment method, eBay will offer customers Adyen, a Dutch payments competitor to PayPal. Adyen currently counts big tech companies like Uber, Netflix and Spotify as customers. Adyen is no small operation.

So what happens now for sellers and buyers?

Well, eBay and PayPal have discussed terms for a deal that could see PayPal remain as a payment option on eBay until 2023 - although we're yet to receive official confirmation this is going ahead. This means that shoppers who love to buy on eBay certainly won't have to abandon their PayPal accounts. At least not anytime soon.

As for sellers, the introduction of the new payment system, Adyen, in addition to PayPal, could lower costs. As anyone who has ever sold anything on eBay knows, the fees are high. eBay takes roughly 10% and then PayPal takes its own fee of 2.9%. eBay hopes that by offering choice and competition, some of the fees that sellers encounter could end up being lower.

Adyen is different to PayPal in that it offers back-end payment services. There won't be a big "Pay with Adyen" logo anywhere. Instead, Adyen allows to you to pay with credit cards and the like. It's not a method of payment in its own right.

This raises questions around the perks buyers and sellers have come accustomed when using PayPal. If eBay removes PayPal entirely and replaces with Adyen, then buyers and sellers could lose their protections. When you pay with PayPal, your purchase is insured and PayPal will help you if you don't receive it or if the goods were counterfeit. In the same vein, PayPal offers a number of seller protections including when a buyer claims they haven't received the product.

Since Adyen is a provider of back-end payment services, it's unlikely that any of these PayPal-style benefits will be offered to buyers and sellers.

More about the eBay and PayPal split

eBay acquired PayPal in 2003 and made the service the primary payment system on the site. At the time eBay paid $1.5 billion to buy the payments service. But in 2015, the two companies split. Both companies signed a five-year agreement to continue operating together, but now that the five years is nearly up, eBay has made the decision to move away from PayPal at the end of the agreement period in 2020. Unless the 2023 agreement ends up going ahead.

Image: Shutterstock

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