Dive Brief:
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PayPal will be free to become a payment option for online retailers and marketplaces like Amazon and Alibaba, the companies said Thursday. eBay will also be able to offer other payment services. The separation is on track to complete by the second half of this year, the companies also said.
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But they won’t be fighting each other on each one’s turf: eBay cannot develop a payments system, and PayPal can’t develop a marketplace, per their separation agreement, which will be in effect for five years plus a one-year transition time.
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The details revealed Thursday also confirmed details about the companies boards. eBay CEO and board member John Donahoe after the split will leave the eBay board and chair PayPal’s board. eBay founder Pierre Omidyar, eBay’s chairman now, will be on both boards, but in non-chair positions. eBay director Tom Tierney will take over from Omidyar as eBay chairman. Bay’s CFO Bob Swan will step down but serve as a director on eBay’s board.
Dive Insight:
These details help clarify the musical chairs and how independent or limited each company will be after they split. PayPal’s forthcoming independence from eBay won’t have much of an effect on how the two companies operate, according to current eBay CEO John Donahoe. But it will be able to work with other e-commerce companies such as Amazon or Alibaba, for example, as long as it offers eBay the same rates. Likewise, eBay will be free to tap other companies for payment processing.
Once separate, the two companies will continue to enjoy favored status, with PayPal giving eBay a referral fee for each new user signed via eBay, and eBay guaranteeing PayPal about 80% of its processing volume. The companies can’t create a new business that competes with the other unless PayPal sells to an eBay competitor, in which case the marketplace could launch another payments platform after 18 months.
But the idea that PayPal will be able to be a payment button on Amazon and other marketplace competitors shows why anyone would want to push for the payment company’s independence. PayPal was hemmed in by eBay to a great extent. The question now is whether the payment system will be able to catch up offline as well.
