eBay (NASDAQ: EBAY) announced today that it will begin a massive expansion of the payments processing business on its platform. Until now, the company has faced certain restrictions due to an agreement with PayPal (NASDAQ: PYPL), which has expired.
eBay said it is now "free to move quickly" with a broader rollout of its payments business worldwide, and is currently expanding in five countries: the U.S., Germany, the U.K., Australia, and Canada, with more to follow.
Image source: eBay.
As of the second quarter, eBay was processing payments for about 42,000 sellers, amounting to $4.7 billion gross merchandise volume (GMV) in the U.S. and Germany. The company said as a result of the transition, the majority of sellers would pay less for its managed payments service, amounting to $17 million in savings on transaction fees thus far.
"Today marks a significant milestone for eBay on our journey toward a technology-led reimagination of our marketplace, and provides a simpler and seamless experience for our buyers and sellers around the world," said CEO Jamie Iannone. "We have already seen incredible momentum with managed payments, and we expect it to deliver $2 billion in revenue and $500 million of operating income in 2022."
eBay expects the majority of its sellers to be using its payments system by 2021 and expects the rollout to be complete by 2022.
When eBay spun off PayPal in 2015, the companies established a five-year operating agreement whereby PayPal would continue to be eBay's primary payments provider. In early 2018, the companies announced that they had decided not to renew the agreement. eBay began processing payments on a small scale in North America with the help of European payments processor Adyen (OTC: ADYYF), which continues as its partner in the expansion of its payments business.
10 stocks we like better than eBay
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and eBay wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of June 2, 2020
Danny Vena owns shares of PayPal Holdings and has the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool owns shares of and recommends PayPal Holdings. The Motley Fool recommends eBay and recommends the following options: long January 2021 $18 calls on eBay, short January 2021 $37 calls on eBay, and long January 2022 $75 calls on PayPal Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.