There was a time when people used to make payments with the help of cash. We can see that the world has completely changed to what it was and to what it is right now. Gone are the days when people to used to pay cash and buy products. It is the time when the technology has taken the lead and at present, the world is turning itself into a cashless economy.
People have started to use the plastic money for transactions and electronic mode to make online payments. Currently, the payments which are made are predominantly of electronic or made through a card. A few countries have adapted to this change and it has requested the citizens of its country to adapt to this change. They want the people to make the payments through plastic money or eWallet.
When we consider an eWallet to make comfortable and easy payments within few minutes, we can consider PayPal to be one of the most used eWallets amongst the people. PayPal is an American company and they handle an online system for online payments which are made by the people. They support all kinds of online transactions and apart from that; it provides alternative methods for payments over the conventional ways of currency exchange, which is done through the cheques and money order.
The company started off in the year 1998 that is the period when the online started to flourish amongst the common public. It is considered to be the world’s largest online payment making organizations. In the year 2002, the company obtained an IPO and on a later note, it became a subordinate to the most renowned online shopping website eBay. It is said that in the year 2014 it moved 228 billion dollars in 30 different kinds of currencies in around 190 different countries and it incurred revenue of around 7.9 billion dollars which is 44 percent of the profit.
eBay and PayPal partnership
The moment acquired an IPO for itself; it was acquired by eBay for 1.5 billion dollars in July 2002. It is said that the auctions which took place eBay, 70 percent of it accepted the payments through PayPal. One of the four listings on the website had the transactions using the PayPal. This particular payment method was the one which has been used most of the eBay users. The company partnered with the famous MasterCard in the year 2007 which helped them to launch the secure card service for its users. They were able to make revenue of around 2.8 billion dollars by the end of the year.
PayPal growth since the beginning has been really tremendous, as the cashless economy started to improve over the years, so did the company expansion as well. By the year 2010, there were around 100 million active users of PayPal in around 190 different countries in the form of 25 different currencies. It also announced that its expansion will be on providing the service in offline mode, so the people can use it in the stores as well.
The Split Up between eBay & PayPal
It has been around 13 years since the time they have partnered together and have grown to tremendous heights together. Both the organizations together were able to pull off a great amount of revenue, as their partnerships with other organizations kept increasing. Unfortunately, the companies have decided to part ways and PayPal has decided to be a standalone company after this long partnership with eBay.
An investor Carl Icahn requested eBay to part ways with its ever-growing payments business. He stated that it would create a value amongst the stakeholders in a beneficial way. The CEO of eBay stated in a letter stating that their business and its customers were glad and provided better service to them by keeping both the companies together, rather than splitting them by any means.
Eventually, we can say that Icahn actually won this debate against splitting both the companies apart. PayPal was trading with NASDAQ to make their company as a public stand-alone company, rather than being partnered with eBay. If we look back a decade ago, we can state that this company is supposed to be the most proclaimed company in terms of online payments. But now, it cannot consider being as one, because there is strong competition for the company at present.
Good news for Stake Holders after the breakup
It is good news for the shareholders if they hold any shares before the parted ways; they still own the shares of PayPal. The share which is owned on eBay before the spin-off will have one part of the PayPal share as well. If we consider it as a single unit, then it might not seem to be a greater share for the shareholders. But, they were positive on PayPal’s part, as it has provided a cover of 45 billion dollars. It is around 30 percent of the cover which eBay holds at present along with the current cover of 34 billion dollars.
PayPal will still be available to make payments on eBay
When the buys products and checks out to make payment, there are different options available for the user to choose from, thus PayPal will be available as an option for them to choose. eBay and PayPal will still stay put together on the department of fraudulence and security of the payments. They have accepted the terms of sharing customer information to provide better customer experience to their consumers.
On the flip side, it is not only a benefit to the consumers; it is a boon to the stakeholders as well. The new shareholders for PayPal will be able to hold a share of the eBay’s market value as well. It is said that eBay was able to pull off more than 30 percent of the PayPal’s revenue and bring in new shareholders to its scaffold. They might have parted ways, but we can see that both the companies are making efforts to stay together by other means.
PayPal – The heart of eBay
PayPal can be considered to the heart of the company, as it has helped eBay to grow to tremendous heights. One of the prominent factors which have occurred so far is that there has been an increase of 14 percent every year for the payments revenue. It has been the most beneficial factor in its business, amongst the three different divisions which the business holds. Unfortunately, it so happened that there was a decline of 4 percent every year over the eBay’s market space.
It is a small decline when we compare to the growth in the revenue, this is the first time that it has occurred that there has been a decline. We can state that eBay is not expecting to follow the same trend in the declining factor. In fact, it is said that the company will be growing over the years from 0 to 5 percent. Meanwhile, we can say that PayPal, as a standalone company might be raising a revenue of 15 to 18 percent over the year. eBay and PayPal would have parted ways for better, but we can say that they will stay connected by other means.
Anand Rajendran is the Co-Founder & CEO of Zoplay. He is a technology and gadget geek. He is an inspirational writer and has written numerous Articles on eCommerce, Crowdfunding, Health & Lifestyle. He loves exploring new things and sharing his knowledge with others.