Non-Auction Sales for PayPal Near Half of Processor’s Total Volume

PayPal Inc.'s drive to process a greater share of its transactions outside of the auction marketplace run by its parent company, eBay Inc., showed more signs of succeeding last week with the release of statistics indicating the online processor is now deriving almost half of its payment volume from online merchants rather than auction sellers. Total payment volume for San Jose, Calif.-based PayPal climbed 34% in the first quarter compared to the year-ago period, to $14.42 billion, according to figures included in eBay's quarterly filing with the Securities and Exchange Commission. Of that amount, the share accounted for by what PayPal calls merchant services reached 46%, up fully eight percentage points from a year ago and from 44% at the end of 2007. Payment volume as reported by PayPal does not include transactions handled through its gateway business. Strategically, PayPal has pushed for several years to diversify its business beyond what had been a heavy reliance on auction activity. Helping to build volume in merchant services is a string of airlines the processor has signed up since June to handle ticket sales online, including Northwest Airlines, US Airways Inc., and Southwest Airlines Co. Earlier this month, JetBlue Airways Corp. became the fourth airline to agree to accept PayPal. To facilitate airline transactions, PayPal has forged a link to a transaction switch operated by the Universal Air Travel Plan (UATP), a Washington, D.C.-based processor that serves about 200 airlines. Major non-airline merchants that have agreed to accept PayPal in recent months include CompuUSA and Overstock.com Inc. In other numbers from the recent release, PayPal reports its base of active users now stands at 60.2 million, a 17% jump from a year ago and up 5% from the end of last year. Transaction volume, again excluding gateway activity, swelled 23% over the year to 211 million, up 3% from the previous quarter. The company's losses to fraud and its user-protection programs were 0.24% of total payment volume, including the gateway. That's down from 0.33% a year ago.