eBay is pushing forward with efforts to move payments in-house instead of relying on PayPal. The company is taking a staged approach to its payments product launch with the goal to reach full rollout by 2020, a move that will let the company take control of the user experience, grow revenue and reduce overhead costs for sellers.
eBay’s new payments system, which it calls Managed Payments, lets the company own the customer relationship from product discovery to checkout. It is one of the more significant ongoing product development projects in financial services today, with a staged rollout approach that stands in contrast to traditional methods in which products are not released until “fully baked.”
“Sellers on eBay Managed Payments are seeing good conversion, and their buyers are able to pay using credit cards, Apple Pay, Google Pay and PayPal,” eBay CEO Devin Wenig told investors during a second-quarter earnings call on Wednesday afternoon. “Most sellers are saving on payment fees, and they simplified their experience with eBay by managing their businesses in one place.”
While payments company Adyen acts as a back-end service provider, eBay controls the front end, including how transactions appear on statements. It’s a move that will drive revenue for eBay and grow the platform’s business. The company expects to realize $2 billion in revenue and $500 million in operating income at scale as a result of the payments efforts, according to Wenig.
The company said it has processed $636 million in general merchandise volume from more than 6,000 sellers since the payment system launched in September 2018. That’s up from $363 million and 4,300 sellers at the end of the first quarter of this year. A handful of sellers, about 5%, currently are piloting the Managed Payments program prior to the system-wide launch in July 2020.
eBay’s in-house payments system simplifies sellers’ checkout processes because they no longer need to manage a separate account to handle payments. eBay also hopes the system will attract new sellers through lower costs. PayPal charges merchants 30 cents per transaction plus 2.9%, while eBay charges just 2.7% of the total order amount. In June, eBay opened Managed Payments to third-party developers, giving sellers access to bookkeeping and accounting tools from outside companies.
Juozas Kaziukėnas, founder of the retail data analytics company Marketplace Pulse, said Managed Payments will benefit sellers, but there will likely be some pushback at first. While some sellers might complain about switching from PayPal’s system, they’ll end up appreciating the increased conversion rates, he noted. “Etsy went through a similar transition,” he said. “There’s going to be an uproar like there was on Etsy, but I’m sure most Etsy merchants don’t even remember it anymore.”