Digital Transactions Authoritative, insightful and timely information for payments professionals
If, as seems to be the case, the future belongs to e-commerce, does that mean the future also belongs to the corollary of e-commerce, digital-payment apps? We chewed on this question as we pondered the significance of eBay Inc.’s decision last month to ditch American Express, and then, just days later, its announcement that it would start taking Venmo.
The significance of these moves, and their timing, are not to be underestimated. Yes, eBay carefully hedged its bet in its AmEx “cancellation” by delaying the actual termination for two months, until Aug. 17. That’s to be expected to clear out accounts, reset software, and give users time to make any wallet adjustments they deemed appropriate. But how convenient that, a mere eight days later, eBay stands ready to announce it will accept Venmo, the mobile-payment powerhouse that threatens to overshadow its parent, PayPal.
No doubt acceptance cost played an important role in the dual decisions. Anybody who follows payments knows AmEx is expensive for merchants, the more so for e-commerce transactions, where seller risk is higher. Meanwhile, Venmo is the favored choice of Millennial and Gen Z users, and demographics is destiny. As AmEx enthusiasts—and they are out there, and are well taken care of by their favorite card company—age and level off, are their numbers to be overtaken soon by the Venmo crowd, who appear to be less enamored of credit cards?
EBay apparently is betting the answer is yes. It may also be betting that Venmo user cohort may, sooner than we all think, overtake the AmEx crowd in sheer numbers. Venmo had an estimated 85.1 million users as of last year, up from 52 million in 2020. AmEx cardholders totaled 141 million worldwide last year. The T&E giant is the fourth-largest global card network, but eBay is looking at growth.
Many observers simply figured the decision came down to cost. AmEx offers many advantages to merchants and cardholders alike, but it’s not cheap to accept. This at a time when seller sensitivity to acceptance cost has reached new heights, and the Credit Card Competition Act—backed by most if not all merchant groups—is vying for passage in Congress.
We tend to think, however, that there may be more to it than that. No doubt eBay will hear from some angry AmEx cardholders on and after Aug. 17—assuming the online marketplace stands by its deadline. And certainly AmEx itself may in the meantime find a key concession that will unlock eBay’s inner sanctum. But none of this erases an obvious fact: the future lies with the young, and with their preferred payment methods.
—John Stewart, Editor john@digitaltransactions.net
