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Plans revealed to split eBay and PayPal


In a reversal of strategy, online marketplace eBay has revealed more details of its plans to split with PayPal, its digital payments system. The surprise move will turn PayPal into a separate, publicly-traded company in the second half of this year. However, the amicable parting comes with a number of strings attached.
 
The initial terms of a post-split operating agreement have been outlined by PayPal and will restrict both companies from (among other things) setting up a new rival business, but it is expected that buyers and sellers will be largely unaffected.


 
Under the terms of the current operating agreement, PayPal will remain eBay’s de facto standard payment system until 2020. Renewal of the agreement will then be yearly and by mutual consensus. There will be a way for ebay to terminate the agreement if PayPal is acquired by one of a number of unspecified hostile companies, but things should by and large stay the same.
 
Rates will be a focus for eBay merchants, but these are also covered in the terms of the agreement and should remain in line with the current pricing relationship. Etailers will be happy to know that there should be little change in fees either; eBay should continue to receive income from PayPal following the split, making it less likely that eBay will ramp up seller fees.
 
The only variable that could shake things up is if PayPal is bought by one of eBay’s competitors and it chooses to terminate the agreement within 18 months. In that case, eBay would set up its own payment system. Furthermore, it would likely end the monopoly that PayPal has had over sellers and buyers in eBay.
 
It would open up the market for a new payment service that is fairer on international transactions and overseas merchants – etailers who need to repatriate funds often get stuck with PayPal’s bad exchange rates and overly large commissions, but since PayPal is the default option on eBay many sellers don’t realise there are better alternatives.
 


A shake-up to eBay’s payments services can only be good for cross-border etailers. It would mean they can use alternative methods for payments and better services to bring all their hard-earned cash back home. One example is currency specialists, as their tools allow you to take advantage of rate fluctuations and to repatriate your money when the rates work in your favour. They often have lower commissions than your local bank, too.
 


It remains to be seen how friendly this parting between eBay and PayPal will be, especially after comments from PayPal’s president, Dan Schulman, who said eBay had been “holding them back.” Etailers will be glad that not much is likely to change immediately. There’s always room, however, for a bit of competition in payment systems – and that could play into the sellers’ hands.

 

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