eBay to Ditch PayPal in Favor of New Payment Processor

eBay has announced plans to launch a new payment processor. For the past 15 years, the auction-based marketplace has used PayPal to facilitate transactions. However, eBay says it will begin to phase out PayPal as a supported payment method beginning in July 2020. According to Recode, news of eBay’s decision to use a new payment processor caused PayPal’s stock price to drop by roughly 12 percent.

So, which payment processor is eBay planning to use? The San Jose-based company says it’s signed a long-term contract with the Dutch payment processor Adyen. Founded in 2006, Adyen is a relatively small company, but it’s worked some of the world’s leading tech companies, including Netflix, Uber and Spotify. Adyen supports more than 200 methods of payment and 150 currencies.

eBay has a long history with PayPal. In 2002, eBay purchased the payment processing company for an estimated $1.5 billion. With PayPal under its belt, eBay created a more versatile and effective checkout system for users of the online auction platform. Furthermore, it allowed eBay to capitalize on transaction fees, which accounted for nearly half of its revenue.

In 2014, however, the two companies split into separate divisions. Former eBay Chief Executive Officer (CEO) John Donahoe attributed the separation to the industry’s changing landscape and the nuances between the two companies. eBay continued to support PayPal payments after the split, but it appears that time is coming to an end.

eBay’s existing agreement with Payment ends in 2020, after which the online marketplace will no longer prominently display the PayPal button. Users can still check out using PayPal, but other payment methods will be given preference. eBay will stop supporting PayPal methods altogether beginning July 2023.

Of course, there’s a good reason for eBay to ditch PayPal in favor of Adyen. After the online auction site split from PayPal, its revenue from payment processing plummeting. Market analysts say that eBay will once again collect payment processing fees with the help of Adyen. This move could yield up to $2 billion in additional revenue for eBay.