It's official: as we reported in November, eBay is making a big change in how buyers pay for goods on its site, announcing on Wednesday that it has signed an agreement with Adyen to become its primary payments processing partner. This will result in a huge shift in how transactions are completed on eBay, though it does not exclude PayPal payments.
Currently on eBay, buyers send money to the seller, usually directly into the seller's PayPal account, where the seller has immediate access to the funds to pay their bills and buy more inventory.
Beginning this year, eBay will start the process of inserting itself into the process - buyers will pay eBay, which will then disburse funds (less fees) to sellers. eBay CEO Devin Wenig told Wall Street analysts today, "in 2021, we expect to have transitioned a majority of our Marketplace customers to our new payments experience."
Wenig said he believed eBay would be able to lower the cost of selling on the site as a result of the change. Certainly it will be a profitable move for eBay if its rival is any indication - Etsy has bragged to Wall Street analysts about the profitability of becoming a payments intermediary.
That's backed up by what eBay Chief Financial Officer Scott Schenkel told Wall Street in November: becoming a payment intermediary would aggregate volume, so eBay would be able to get lower PayPal or other payment operator rates.
Why Sellers Dislike Idea of eBay Collecting Buyer Payments
The change won't sit well with many sellers. We know that for a fact because:
1) Sellers didn't like it when Etsy did it (some sellers are grandfathered in to being able to use their own PayPal account, but only if the buyer elects to pay them directly during checkout).
2) We wrote about eBay's plans to become a payments intermediary in November and there was immediate pushback from sellers, which you can read here
"If eBay wants to buy my entire inventory, warehouse it, sell it, ship it and deal with returns - then send me a bank deposit once a month - eBay can handle the financials," one EcommerceBytes reader wrote at the time. "Otherwise, it's my merchandise, my financial investment, my sales - MY business - and they can keep their greedy paws out."
There's initial confusion about the announcement eBay made today. eBay is not excluding or replacing PayPal. But instead of a buyer paying into your PayPal account, the buyer will pay using eBay's PayPal account - or buyers could use other funding methods eBay makes available such as credit cards, which could impact PayPal volume.
Again, look to the Etsy model
to get a better understanding of the change. Buyers pay through Etsy Payments (formerly called Direct Checkout), and the buyer can choose to fund the payment through PayPal, a credit card, a bank transfer, etc.
The fact that sellers must wait for eBay to disburse funds could impact their cash flow. eBay will set the disbursement schedule parameters - it could ban some sellers from frequent disbursements. It could also set minimum disbursement amounts.
And as Etsy warns its sellers: "Depending on your bank, funds may take 3 to 5 business days to appear in your bank account. If a deposit day falls on a holiday, available funds will be sent on the next business day."
Given frequent complaints about eBay billing issues and about poor customer service, sellers have reason to be concerned about eBay coming between them and their customers (and between them and their money!).
One possible benefit: buyers are bound to have more choice around funding method, and will be able to whip out a credit card knowing it won't be seen by the seller or PayPal, only by eBay. What's unclear to us is whether that could affect the rate of chargebacks and sellers' success to fighting them.
Read eBay's full announcement here
and tell us what you think. If the change boosts sales by increasing buyer trust; and, if the change reduced the total costs of selling on eBay (inclusive of payment processing fees) - would those benefits make it palatable?