Earlier this month, Paymentech announced it would offer PayPal to its merchant customers early next year. Paymentech says it processes more than half of Internet transactions and is the first merchant acquirer to resell and fully integrate PayPal's online payment service onto its proprietary processing platform.
Signs are increasingly pointing to PayPal as eBay's engine for growth. The auction site has seen its historically phenomenal growth rate slow in the U.S., though international growth rate continues to dazzle observers. But PayPal may have only scratched the surface of its potential.
PayPal has wide adoption on auction sites, including eBay, and on small "home-grown" sites. For small sellers who don't have the ability to accept credit cards, PayPal is an easy way to accept payments online. Bloggers and nonprofits looking for donations find it easy to place a PayPal donate button on their site.
But until recently, the payment method has not taken off among large retail sites. Announcements like the one from Apple this past weekend signal things may be changing, with greater merchant acceptance of PayPal.
A headline from Internet Retailer magazine last month read "PayPal ramps up new services as it makes its move off of eBay." The article quotes Todd Pearson, PayPal's general manager of merchant services, saying the service decided 18 months ago to become "more deliberate and strategic in moving off of eBay." PayPal has developed APIs (application programming interface) to allow merchants to integrate PayPal into their order-management systems.
And in August, PayPal changed its fee structure, introducing a new tier for high-volume sellers. Those who reach over $100,000 in monthly receipts qualify for a rate of 1.9% plus 30 cents per transaction compared to a Merchant rate of 2.2% plus 30 cents/transaction for sellers achieving $10,000/month in sales (previously $1,000/month).
Meanwhile, eBay continues to promote PayPal to its buyers and sellers. Loyalty programs, sweepstakes and other promotions on eBay are often limited to sellers who accept or buyers who pay with PayPal. eBay tells buyers they are safer if they use PayPal to purchase items on the site.
Perhaps the biggest indication that eBay views PayPal as a significant driver to growth is the recent promotion of Jeff Jordan, eBay's Senior Vice President of North America, to President of PayPal (http://auctionbytes.com/cab/abn/y04/m12/i03/s02). Some industry insiders believe Jordan is being groomed as successor to eBay's current President and CEO, Meg Whitman.
Eric Jackson, former Director of Marketing for PayPal and author of the book "The PayPal Wars," feels Jordan's promotion is significant. "PayPal is eBay's crown jewel as it looks for a lot of its growth in the years to come." Since eBay acquired the payment service in 2002, many longtime PayPal executives have left the company, and many eBayers were brought in. Jackson believes Jordan may not find the internal culture much different from the one at eBay, saying PayPal looks more like eBay now than when the company was first acquired 2 years ago.
While users have little concern over corporate culture at the two companies, they are concerned over technical issues. When PayPal suffered an outage in October, users feared the same technical outages that seem to plague eBay might spread to PayPal.
Jeff Jordan will have his work cut out for him to satisfy PayPal's many vocal constituents. But he should be used to that from his tenure at eBay.
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