Ralf Gladis, CEO, Computop – the payment people
PayPal may be forgiven for feeling sore following eBay's announcement last week that it is replacing PayPal as its main payment provider. Afterall, it had been the sole payment service provider for the auction site since the early days. In fact, PayPal was owned by eBay itself up until 2015. However, some might argue that a review of the relationship was long overdue. Either way, what's clear now though is that PayPal's loss is likely to mean an improvement in choice for eBay customers and sellers, whilst also empowering eBay.
Convenience and choice are both killer apps when it comes to payments. PayPal is certainly convenient and used by many, however, consumers now want more choice and the ability to easily use their preferred local payment method. When customers can use the payment method they like and trust with ease, they tend to convert more. In replacing PayPal with a customised payment service,eBay is able to provide customised checkout processes for the local habits of buyers in all markets.
By replacing PayPal with a customised payment service, eBay gains more control of its checkout process. Currently, eBay users have to register with PayPal. Once they do that, PayPal enables them to use their preferred local payment method.However, all of that happens on PayPal's platform and eBay has no transparency or control. By integrating a payment process into its own checkout eBay will be able to control the entire process and gain valuable intelligence on the buyer's choices and preferences. This is likely to improve services for both buyers and sellers, and eBay gets access to a goldmine of customer data including preferences and behaviours.
Taking control over dispute management is another opportunity for eBay to improve the service for sellers and buyers, rather than relying on PayPal's buyer protection and settlement process. However, this also raises new risks that eBay will need to assume responsibility for. eBay will have to ensure a proper risk management to balance seller and buyer protection itself.
Significantly, eBay will also be able to build a business model from the payment process. As PayPal provides a global payment method it adds a lot of service and value, explaining the high fees involved. However, the fees of local payment methods are typically much lower than PayPal's. eBay should be able to provide lower payment fees to its sellers and still secure a margin for itself in the process given its large volume.
Reviewing and replacing payment options is normal for international retailers. In fact, some might say that eBay relied on PayPal for much longer than it should have. According to eBay itself, implementing all the changes necessary will be a "multi-year journey". The first signs of the new checkout should appear in the U.S. during the second half of 2018, but it will take until 2021 until the new payment process should be in place. This shan't be an easy job. eBay has a substantial challenge ahead of it that will tie up many of its resources for several years.
Looking forward, payment brands that simplify processes for consumers will be the ones that are likely to help retailers win the battle for conversions. And those will include options like e-wallets from PayPal, AliPay, MasterPass and WeChat, as well as tried and true options like domestic credit cards.
However, we are also starting to see the rising popularity of bank accounts for e-commerce payments due to the introduction of Faster Payments in the U.S. and UK and Instant Payments in Europe. These are revolutionising payments from account to account.
Convenience is king. It won't be long before we will be living in a world where our devices will process payments, and virtual and augmented reality prevail in the sales channels. We're already seeing user names and passwords replaced with biometric authentication
It will be only those payment options that support innovations which are easy, efficient and secure for consumers that will win in the payments space of the future.