Monday, January 7, 2019

New eBay Payments System ambition through Adyen

Last year, eBay made a large acquisition in purchasing Adyen (an Ireland-based payments system) for nearly $3 billion dollars.  The goal of this purchase was to weed out PayPal as the third-party payments system, which has been used by eBay for a long time.  PayPal has been a source of scrutiny by many sellers and buyers.  eBay launched their new payments system using the Adyen technology last fall, and millions have already transitioned.  PayPal will remain as an optional provider for a few more years until the eBay/PayPal contract and relationship fully expires.

The positives of the transition:

1.  Adyen finally allows eBay's payments and money transfers to be all in one place! You no longer need a PayPal account with a dual set of customer information.  This is a great thing and eliminates any confusion due to the duality.

2.  eBay's payments system charges a cheaper fee than PayPal: it is a flat fee of 2.7% per transaction.  PayPal.  PayPal has a fee of 2.9% + $0.35 per transaction for domestic customers, and 3.9% + $0.35 per transaction for international customers.

3.  eBay's payments system transfers automatically on a schedule that you set, but is defaulted to every day.  You save work and time since you do not to set up a manual transfer.

The negatives of the transition:

1.  Slower money transfers with the eBay payments system.  With PayPal, you are paid cash up-front while PayPal deals with the back-end banking delay nonsense firsthand.  Now that eBay has transitioned to Adyen, the clearance times fall directly onto the eBay seller.  Some transactions can take up to a week just to clear!  After the moneys are cleared and the transfer is initiated, it takes longer to receive the funds in your bank account than PayPal.  Expect wait times of 2-3 business days; sometimes longer!  When we were using PayPal you could expect to get your money the next day or even quicker (if you paid a fee).

2.  Loans system.  PayPal had set up an excellent loan service called "PayPal Working Capital" that eBay sellers had easy access to.  Now that the relationship between eBay and PayPal is in shambles, this system is now extremely risky to use.  PayPal Working Capital takes a portion of each eBay transaction to slowly repay the loan that you take, but now you can no longer do that if you switch to Payments by eBay (and you cannot go back easily!).  Payments by eBay is planned to fully replace PayPal. Unfortunately, PayPal sent a notice to sellers warning them you cannot take out a loan if you use Payments by eBay, and this could be devastating to an outstanding loan or even worse - your Credit Score!  This wasn't planned very well by either company in the transition phase.  What's worse is that eBay has not been clear about the alternative - Square Capital.  eBay claims that the sellers can use Square Capital but we have yet to witness an easy access to this new loan service.  Hopefully they will open the Square Capital loans door soon to the eBay community!

3.  In the end, its all the same thing.  Whether you pay 2.9% or 2.7%, the amount of time, money and maddening effort eBay has spent on the transition/upgrade has been beyond insane.  Yes, PayPal was annoying in the way that you had two separate accounts and sure its nice to get a small discount now, but other than that the benefits to Adyen aren't really all that great.  And the transfer speeds with eBay Payments is very slow and frustrating sometimes.  Ebay was also strongly motivated for Adyen because it has a sleek, simple appearance in comparison to PayPal.  For customers, it probably has more benefits to use Adyen, but sellers only get the benefit of the 2.7% rate.  Don't forget that PayPal had super fast money transfers to your bank account, since they worked in reverse (cash up front).

Overall, Adyen technology underneath the new Payments by eBay system is kind of neat and since the sellers know its long term, we don't really have a choice but to use it instead of PayPal.  Other than that, we have a slightly cheaper rate of 2.7%, but there really isn't much benefit and PayPal had a superior underlying infrastructure to it.  We also do not know any kinds of security risks or hazards with eBay's new payments system.  With PayPal, all transactions were covered and there were varying levels of departments looking into all types of transactions.  Payments by eBay gives us no kind of reassurance - you just type in your bank account number and routing number but there isn't even a deposit confirmation.  The biggest downer is that we no longer have access to PayPal Working Capital, which was in my opinion the best, simplest and least expensive electronic Loan service on the web.

New technology is nice and useful, but I think it needs to take into consideration a lack of priorities.  Let's see what eBay has to offer us moving forward.

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