Separation from PayPal Will Likely Free eBay to Add Wider Range of New Payments

One implication of the breakup of PayPal Inc. and its parent company eBay Inc., announced by eBay earlier this week and planned for next year, is that eBay will likely be free to add a slew of alternative-payment methods for sellers to accept on its online marketplaces.

For years, eBay has restricted sellers to a narrow range of alternative-payment options that include, most prominently, PayPal, which is integrated with eBay checkout, the interface buyers use for a streamlined transaction. The only other alternative payments permitted are from Skrill, a U.K.-based processor, and ProPay, a Lehi, Utah-based merchant aggregator that is part of Total System Services Inc. (TSYS).

PayPal Credit, formerly known as Bill Me Later, a company eBay acquired six years ago, is also allowed.

Buyers can also use credit and debit cards directly, as well as make arrangements to pay sellers in person. Checks are permitted only in cases of high-ticket merchandise such as automobiles and boats.

While eBay’s favoritism toward PayPal—and bar on most other alternative-payment providers—may have been understandable during the 12 years the online auction giant has owned the processor, observers now say it’s likely eBay will be planning to add additional payment methods once PayPal is a separate company. “I do think that is probably the case for eBay,” says James Wester, practice director for worldwide payment strategies at IDC Financial Insights, Framingham, Mass.

Such alternatives could include any of hundreds of alternatives that have emerged over the past decade, including high-profile wallets like Apple Pay from Apple Inc. Target Corp., for example, plans to accept Apple Pay transactions through its mobile app.

Wester says eBay’s base of mostly small online sellers will likely pressure the company to add payment methods in a bid to cater to customers. “There are some merchants interested in those alternative payments,” he says. The only method that might stay sidelined for a while, he adds, is Bitcoin, which while gaining popularity remains controversial.

EBay announced on Tuesday that it and PayPal will begin operating as publicly held entities independent of each other beginning the second half of 2015. EBay officials did not respond to an inquiry from Digital Transactions News on the matter of alternative payments.

EBay first explicitly restricted payment methods in the fall of 2008, when it introduced a policy requiring electronic payments. Until that time, buyers had been able to send checks and money orders to eBay. The only payment methods permitted under the new policy were PayPal, ProPay, and payment cards. The policy also required third-party payments vendors and sellers with merchant accounts to integrate their payment systems with eBay’s checkout system.

Two years later, the company banned third-party checkouts but began permitting sellers to use two additional payment gateways, CyberSource Corp. and Authorize.net, besides PayPal’s Payflow service.

Authorize.net was and is a unit of CyberSource, which in turn was acquired in 2010 by Visa Inc.