In a move that surprised many, eBay announced on Wednesday that it’s replacing PayPal as its main payment processing partner, having signed an agreement with Adyen, a global payment provider based in the Netherlands, to replace its former subsidiary. Going forward, eBay plans to take a more direct role in the payments process by serving as an intermediary using Adyen’s technology.
In its statement on the matter, eBay stresses that the transition to the new payment model “will be a multi-year journey“ and can only be completed “within the parameters of the Operating Agreement with PayPal”, which ties eBay to its longtime partner through mid-2020. After that, PayPal will still be available as a payment option to eBay customers until (at least) July 2023, as both companies agreed on.
Having been part of eBay from 2002 until 2015, PayPal’s business has long been closely intertwined with that of eBay, but in recent years, the payment provider outgrew the shadow of its former parent. Having been spun off into a separate public company, PayPal’s market capitalization is currently almost twice as high as eBay’s and as our chart illustrates, the company is not as dependent on eBay as one might think. The volume of payments processed by PayPal was more than five times as big as the value of all goods sold on eBay in the most recent quarter. In fact, eBay transactions only accounted for 13 percent of PayPal’s payment volume in Q4 2017.
Regardless of the fact that PayPal’s future doesn’t depend on its close ties with eBay, the company’s shareholders weren’t happy with the surprise news: despite having beaten Wall Street expectations in its fourth quarter earnings report on Wednesday, PayPal’s stock price dropped 10 percent on Thursday morning.
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