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PayPal Can Improve After Separating From eBay

Dec. 04, 2014 9:45 AM ETeBay Inc. (EBAY)7 Comments
Zain Abidin profile picture
Zain Abidin


  • Since eBay's acquisition of PayPal back in 2001, it has grown at an impressive pace and has not been showing signs of stopping.
  • By enacting the right initiatives at the right time, PayPal has positioned itself to capitalize on the upcoming opportunities in the market.
  • Splitting off PayPal from eBay would help to maximize shareholders' value. I believe that PayPal has a better future as an independent.

At the end of September 2014, eBay's (NASDAQ:EBAY) management announced it would operate eBay's e-retailing business and PayPal business segment separately. Most of the analysts and investors following eBay were already of the opinion that PayPal could operate better on its own.

Over the years, PayPal has gained significant market share. The company has approximately 152 million registered accounts, strong ties with 15,000 financial institutions, and provides a localized payment experience by accepting payments in 26 different currencies. I think that its presence in 203 countries has allowed PayPal to successfully position itself as the largest and most trusted digital payment service on the back of its mass merchant acceptance, higher security -- contrary to revealing clients' personal information on a third-party platform -- and speedy completion of transactions via just a few clicks.

In this article, I will analyze how PayPal can improve itself after separating from eBay.

PayPal's Performance in the Recently Reported Quarter

During the third quarter of the fiscal year 2014, eBay's payment business generated revenues of $1950 million, reflecting an increase of 20.4% YOY. During the same period, PayPal's total number of active users reached 156.9 million, reflecting an increase of 3% from the previous quarter and 14% YOY. The total number of payments processed was 894.6 million, reflecting an increase of 5% from the previous quarter and 23% YOY. Total payments volume in dollar terms were $56,576, representing an increase of 3% from the previous quarter and 29% YOY. The average takeaway rate (commission percentage on transactions) was 3.45%, reflecting a decline of 2.27%.

Opportunities in the Marketplace

Source: emarketer.

According to the research conducted by emarketer, business to consumer sales is expected to grow at a CAGR of 17.4% and is expected to reach $2.357 trillion by 2017. As increasing numbers of people will shop online, online

This article was written by

Zain Abidin profile picture
I am a finance student who believes in alpha trading and selective bets that can yield high return. Moreover, this platform will provide me an excellence opportunity to share my ideas and read ideas of others self made investors. My area of interest is technology, consumer goods and oil and gas.

Analyst’s Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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Comments (7)

chirag11kapoor profile picture
Thanks for the article. Cheers
Probably understanding the impact of Apple Pay and Alipay would be a good area to research further.
" Once PayPal becomes independent, it can form alliances with various other large companies like Alibaba, Google (NASDAQ:GOOG), Facebook (NASDAQ:FB), and others to grow mutually."
Its easier to see how an alliance with Alibaba become possible after the split from EBAY, but I don't see how it makes a difference with FB or Google.

Since Ebay has fueled the initial growth of Paypal by channeling Ebay users to Paypal, what will fuel that growth post-Ebay ? I'm not sure if that is digital wallets. To be specific, Paypal has succeeded with digital wallets which in turn will help Paypal maintain its competitive advantage, but what will bring Paypal new users or encourage more uses ? I'm just not sure mobile payments changing anything other than allowing the entrance of more competitors.

I wonder, will EBAY be a dog with fleas after the spin off of PAYPAL. I do know one thing. I want to own PAYPAL I even with Applepay & others.
why not even a single word of apple pay & its impact?
it does not speak about apple pay and how it is going to affect / enhance paypal. That is the known key area of concern and the author has conveniently omitted that aspect for whatever reason.
FidoSysop profile picture
Don't forget the growth of PayPal due to it being the only payment method accepted on eBay marketplace.

Execs know the eBay brand is nothing but a smelly corpse waiting for the undertaker to haul it's lifeless body away.

Me thinks the money is on PayPal hence the split.

Just my two cents worth as usual.
Nicky Pappo profile picture
Thnx for this interesting article!
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