eBay Breaks Up with PayPal for Another Partner

eBay Breaks Up with PayPal for Another Partner

Even in business, some partnerships are not just meant to last. Despite working closely together for more than a decade, eBay recently announced that it would be ditching long-time partner PayPal as its primary payments processor by 2020.

In a post on its company website, eBay announced on Wednesday that it has signed an agreement with Adyen, to replace PayPal. Ayden is an Amsterdam-based global payment company and one of PayPal's rivals.

eBay acquired PayPal in October of 2002 for $1.5 billion. At the time, the two services seemed to be well-paired with eBay controlling the lion share of the online auction market while PayPal was the top player in online payment processing. However, by July of 2015, the two returned to being standalone businesses.

While Adyen will eventually be easing out PayPal from its current role, eBay assures that PayPal will remain one of the payment options that buyers can choose upon checkout. eBay further revealed it has an "Operating Agreement with PayPal, which remains in place through mid-2020."

According to the auction giant, the shift to Adyen will bring in multiple benefits to both sellers and buyers. The cited benefits to sellers include lower costs and a simplified pricing structure, easier tracking of transactions and payment information as well as greater sales conversion due to the expanded payment options.

Buyers, on the other hand, will now have more payment options upon checkout. eBay likewise promised that a more streamlined checkout experience.

Working together with eBay is a big win for Adyen especially considering the company's relatively small size. Adyen posted a net revenue of $178 million in 2016. In comparison, rival PayPal posted almost $11 billion in revenue for the same period.

Understandably, eBay's announcement negatively affected PayPal shares with its price plummeting by as much as 10 percent on Wednesday's trading. However, it is unclear how much the Adyen deal will affect its bottom line. At the moment, PayPal's market value is around $102 billion, more than twice Ebay's value of $42 billion. In addition, PayPal seems to be doing fine and has recently reported a 59 percent rise in profit for the fourth quarter of 2017.