eBay announced that it has reached a significant milestone in its efforts to move sellers from PayPal to its end-to-end payments system, also known as eBay Managed Payments.
When eBay and PayPal split into two companies in 2015, the two organizations agreed on a five-year exclusive deal for PayPal to continue to manage payments on eBay.
After the third year of the agreement, eBay could launch and run a limited testing program using its own payments solution.
This happened in the summer of 2018 when eBay invited select US sellers to participate in its new payments system beta program, even offering discounts.
However, it quickly became a quagmire when participating sellers discovered they no longer could accept PayPal during the initial testing phase.
This was a big problem as most buyers on eBay were using PayPal and couldn’t understand why a few sellers could not accept the de facto standard payment method on the marketplace.
eBay initially said once a seller opted into the new payments program, they could not opt out. But the blowback was significant enough that the company relented and permitted sellers to switch back to PayPal if they contacted customer support.
Six months after the testing program started, only about 3,500 sellers were in the program, which appeared to be significantly less than was allowable under the eBay agreement with PayPal.
Finally in April of 2019, PayPal was integrated into eBay Managed Payments, allowing sellers who stayed with the program to accept payments through PayPal again.
Besides these launch issues, many sellers thought eBay was changing something that wasn’t broken and never adequately explained the reason for the push towards its own payments solution.
The entire roll out and messaging appeared botched, especially with eBay not being as forthcoming about losing access to PayPal as they should have been.
It really didn’t get much better after that for a long time. eBay Managed Payments continued to be plagued by seller acceptance as the program was seen a downgrade to PayPal’s more extensive features that effectively enabled sellers to use PayPal as substitute for a business bank account.
One of the biggest gripes was that sellers had to setup bank account to transfer funds into before they could be use them to pay for anything.
Even a basic process like paying for shipping labels on eBay was made more difficult as sellers couldn’t use the funds from sales in eBay to pay for shipping labels until 2020.
Especially small sellers became very frustrated since they had to pay for the labels using another payment method, and then had to wait days for eBay to transfer the funds to their bank account.
Previously, something that could have been managed simply in PayPal became a multi-step process that added to accounting complexities many sellers hadn’t faced before.
And that was not all. eBay Managed Payments was plagued by payout failures (including this year) with many complaints about payout delays and other issues requiring contact with eBay customer support specialized in eBay Managed Payments.
Despite all the issues, eBay kept plowing forward and rolling out the program in more countries once it got passed the terms in the original agreement with PayPal.
It also does appear that many issues have subsided after a slew of problems in late 2020 and early 2021 sent sellers complaining on social media.
Today, it appears there are not as many reports of technical issues with eBay Managed Payments and newer sellers, who never used PayPal on eBay, only know the current system.
In theory, new sellers should help quell the negative voices of long-time sellers. But eBay still has a problem with seller churn, one they admit to, but not the full scope of it when looking at their own data beyond 12 months.
If this seller churn is because of eBay Managed Payments or something else, may become clearer over the next few years as other factors such as the COVID pandemic or sales of key business units (there is not much left to sell that is not core to their business now) washes out the numbers.
Why Build eBay Managed Payments?
As mentioned earlier, the vast majority of eBay sellers were happy with PayPal and an often-asked question why change something that is working never received a good answer.
After eBay and PayPal split into separate companies, it was fairly obvious that eBay would go down this path of building some in-house payments capability. Otherwise, why even address that possibility in the agreement with PayPal?
Other marketplaces, such as Amazon and Etsy, also process payments on their platforms, so all eBay was doing was following the same business model.
The bottom line is that eBay Managed Payments was a way to squeeze out extra revenue from existing sales, especially since the marketplace’s growth had been stagnant for so many years.
In earnings call after earnings call, eBay management touted the potential of the program to Wall Street analysts, clearly suggesting this was a significant part of their strategy to improve revenues.
Making a solid argument to existing sellers that eBay Managed Payments was the way forward was a much harder sell, and maybe one they didn’t anticipate having so much trouble with.
One of the few real arguments they had was that sellers would see a reduction in processing fees versus PayPal. They focused heavily on that early on and still try to use it today, but less emphatic.
In the blog post eBay posted about reaching the milestone that eBay Managed Payments is now live in all global markets, Alyssa Cutright, VP of Global Payments says, “Sellers can run their businesses in one place, and attract potential buyers with more ways to pay. Most sellers can also expect to see savings.”
But since the cost of payment processing and the final value fee are now one fee in most categories, how much of savings do sellers really get from this arrangement? How can anyone really quantify this today?
However, she does make a better case that some processes may be simpler today because of eBay Managed Payments.
“In the previous legacy experience, sellers had to toggle between two sets of accounts, reports, online tools, policies and customer service. Now, sellers can run their business in one place, with one set of protections and policies,” Cutright explained.
Although, one could argue sellers still need two sets of accounts as they have to transfer funds to their bank so they can pay bills in the real world. This was already possible with PayPal, but is still lacking with eBay Managed Payments.
It’s somewhat ironic that PayPal launched a new app this week that allows it to provide more bank-like features, underscoring how much PayPal as evolved as eBay Management Payments still tries to catch to PayPal features sellers were happy three years ago.
Looking Ahead – eBay Managed Payments
Last December, with less than a year on the job, eBay CEO Jamie Iannone said that they are embarking on eBay Managed Payments 2.0, which among other improvements, “will become a wallet experience.”
That sounds promising, even if that means eBay Managed Payments just reaches the features sellers were used to having with PayPal when this process started.
Another area that sellers have often complained about is unpaid items which eBay Managed Payments has been an integral part to make that situation better.
Cutright explained, “Managing the payments experience ourselves also allows us to eliminate a pain point that sellers occasionally face on eBay — unpaid items. Changes to checkout have been made to address this issue, and today 99 percent of fixed price transactions are paid up front.”
There are other opportunities eBay can leverage its integrated payments processing system to help streamline the sales, checkout and, yes, returns process and offer more complete business insights.
eBay has full control over which payment methods it will accept, even localized ones, and doesn’t have to rely on a third party to implement them.
And there is a value to having one set of protections and policies with one company as previously some buyers would try to game the system by opening a claim on eBay and then separately on PayPal, even so that was supposedly not allowed to happen, yet it still occurred.
Fundamentally, eBay Managed Payments is a promising idea, and it can eventually offer many positives for sellers. Unfortunately, the company had big missteps in the beginning that soured the program to many long-time sellers.
eBay doesn’t have to build a clone to PayPal offering personal financial services such as crypto currency trading, savings accounts, and a rumored stock trading platform. But it still has some catching up to do to offer the features that were available to sellers previously when using PayPal.
If the company can build out eBay Managed Payments to become a wallet like experience and continue to reduce seller pain points such as unpaid items, then its payments system may one day make legacy sellers forget about the PayPal days.
That would be the ultimate milestone for eBay!
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