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Will PayPal’s Split from eBay Change the Mobile Payments Market?

ebayDue to the increasing mobile payments market size and the developments made by major payment processing companies, eBay has announced that its subsidiary PayPal will now be its own publicly traded company. Analysts have predicted that this move could signal big changes for businesses that offer mobile payment services.

PayPal’s largest competitor thus far is the newly unveiled Apple Pay, but services such as Google Wallet, Square, Stripe and Alibaba’s Alipay are catching up. Earlier this year, Amazon made plans to enter the industry with its own mobile credit card reader.

PayPal going public means that it could acquire other companies, such as startups like Square and Stripe. The company could also offer stock options when it goes independent early next year.

“This is a great move for PayPal as they will gain even more momentum within the mobile payments market. Although, Apple pay will provide some competition, PayPal will now have the opportunity to focus their efforts and dollars on innovative ways to stay at the top,” says Matt Moore, President of BNA Smart Payment Systems Ltd. “I would not be surprised at all if they begin to acquire payment processors and start ups, as the article suggest. Seems to be the way the industry is moving.”

Approximately half of eBay’s revenues come from its PayPal service, which generated $6.6 billion in 2013. PayPal was acquired by eBay back in 2002.

Because PayPal would become self-governing, it could begin hiring more workers, especially top-tier talent.

Tech blog Re/code noted that executives who may have been wary of PayPal’s status as a subsidiary might rethink joining the company, especially if stock options are offered. However, that same article pointed out that with the independence comes more competition with Apple Pay.

Both PayPal and eBay will see a shift in leadership: former American Express executive Daniel Shulman will act as PayPal’s new CEO, and Devin Wenig, president of eBay’s Marketplaces division, will replace current eBay CEO John Donahoe after PayPal’s spinoff.

Donahoe explained that although eBay and PayPal were brought together 12 years ago to offer a one-stop shop for purchases and payments, today they can focus on their individual goals. “A thorough strategic review with our board shows that keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively,” Donahoe said in a statement.

The September 30 announcement hasn’t hurt eBay yet: the company’s shares rose by 8% on the morning following the news.



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