One of the most storied relationships in the tech industry will soon end. eBay has announced that it is going to stop working with PayPal as its main payment service beginning in 2020, and would start later this year to move a small percentage of its high volume of payments to another payments partner.
eBay, in place of PayPal, signed a deal for the long-term with Amsterdam-based Adyen a payment processor founded in 2006. Adyen has global companies working with it that include Netflix, Spotify and Uber amongst others.
The sole focus of Adyen’s business is providing back-end payment services such as the processing of credit cards so there will not be any Adyen pop-up buttons for payment on eBay. However, Adyen will become eBay’s primary payments processor around the world.
After the conclusion of the existing agreement between e-Bay and PayPal expires in 2020, PayPal is to remain as a payment option for eBay shoppers, but it will not be featured prominently ahead of credit and debit card options as it is now. PayPal will stop processing card payment at that same time for eBay.
PayPal shares were down by 12% on the announcement during trading after hours. At eBay, this decision is being looked at as a way to take over more control of critical checkout experiences as other online shopping giants such as Alibaba and Amazon have, while giving shoppers on eBay more payment options.
Adyen can support over 200 payment methods around the world, said eBay in its blog post that announced the decision.
This move is expected to eventually add revenue to eBay of up to $2 billion, because the company will begin to charge sellers on eBay for the payments services, while today that is done by PayPal.
For Adyen, the deal with eBay is a big win for a business of its size. The payments processor posted $178 million in net revenue for 2016 in comparison to close to $11 billion for PayPal for the same period.
One would then assume that there was a good chance eBay would be taking a stake in Adyen along with its commercial agreement so it would benefit from the upside created by this. However, at this point it is not saying anything.
Adyen could file for an initial public offering this year, said analysts.
PayPal become the main payments processor for eBay in 2003, just a couple of months after eBay acquired it for $1.5 billion. The companies split into two public companies in 2015 and signed an operating agreement for five years through mid-2020.