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Unshackled from eBay, PayPal re-emerges as a payments giant

Unshackled from eBay, PayPal re-emerges as a payments giant

Gilles Ubaghs of Ovum notes the challenges ahead for PayPal as it repositions itself as a broader commerce platform

PayPal is repositioning itself as a broader commerce platform. The strategy will be critical to its long term survival in an increasingly competitive space, says Gilles Ubaghs, financial services technology analyst at Ovum.

“Unshackled from eBay and without the demands of supporting a specific mobile ecosystem, PayPal has the freedom to innovate in a broad variety of areas,” notes Ubaghs, commenting on the impact of PayPal’s separation from the online retailer.

“Notably, PayPal is the only survivor of the many payment options that eBay initially used,” he states.

PayPal has since its acquisition grown to become arguably the most trusted specialist online payments provider and a truly global consumer and merchant facing brand, he says.

Ubaghs notes how in a recent global survey by Ovum, 75 per cent of retailers report they would consider working with PayPal in future.

PayPal and eBay were both critical to each other’s global growth, he says.

“For eBay it provided a clear trusted escrow service to enable consumers to transact with each other, while for PayPal the need for such services on eBay gave it a considerable driver in gaining that initial consumer incentive to signing up for the service, a stumbling block that even newer platforms like Apple Pay and Android Pay continue to struggle with.

“Treading a path that Uber later followed, PayPal’s expansion into global markets in many instances was faster than the local regulatory environment, a challenge that eBay’s substantial resources was also able to help it deal with.”

Gilles Ubaghs of Ovum
Gilles Ubaghs of Ovum

A critical component in its moves to diversify is that PayPal is not tied to any specific hardware platform or technology.

Gilles Ubaghs, Ovum

Highly strategic acquisitions

Ubaghs says PayPal is now following an explicit strategy of expanding its broader capabilities beyond its core wallet service, much of it driven through highly strategic acquisitions across the payments space.

Its new-found freedom with eBay comes with the additional benefit of a substantial cash war chest to hand of an estimated US$5 billion, minimal debt, and high levels of interest from investors giving it further scope for acquisition, says Ubaghs.

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He says PayPal is expected to replace eBay outright in the S&P100 following the demerger, and appetite will be high for further development.

“PayPal as an organisation is now bigger than its core wallet platform, and will continue to develop these new services as it diversifies its portfolio of capabilities.”

This diversification of services includes its expansion into consumer credit with PayPal Credit, mPOS with PayPal and its numerous highly strategic acquisitions.

These acquisitions including online payments provider Braintree, wallet provider Paydiant, and international mobile remittance platform Xoom, significantly expand PayPal’s capabilities in both the merchant and consumer spaces, with broader full stack capabilities.

Combined, these expanded capabilities will help PayPal to better weather any turbulence in its core wallet platform market, says Ubaghs.

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A critical component in its moves to diversify is that PayPal is not tied to any specific hardware platform or technology, he notes.

“This could prove problematic in some areas, such as most notably NFC deployment for proximity payments via its own wallet. However this hardware agnosticism means that PayPal as a platform, including through its numerous acquisitions has further scope to develop its products and services to potentially reach a broader audience than its competitors can achieve.

“Unshackled from eBay and without the demands of supporting a specific mobile ecosystem, PayPal has the freedom to innovate in a broad variety of areas,” he concludes.

Send news tips and comments to divina_paredes@idg.co.nz

Follow Divina Paredes on Twitter: @divinap

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