EBay has modified its platforms, including its namesake shopping service, to include grouped listings and a simpler payment process to lure shoppers amid stiff competition from Amazon.com Inc (AMZN.O).
PayPal Holdings Inc (PYPL.O) would still remain a payment option as eBay expects the "transition to full payments intermediation will be a multi-year journey". The company will also continue to provide localised payment options for buyers and sellers, tailored to their unique needs.
EBay's backing for Adyen could turn the smaller payment processor into a "much more robust competitor" to PayPal over time, Palmer added. It hopes to have transitioned most of its Marketplace customers to its new payments system in 2021. PayPal hasn't provided analysts with much color on the impact yet. "Although the share of revenue from EBay has diminished over the years, the share of profit is far more substantial due to the terms of the spinoff".
The announcement surprised some investors, who expected the companies to announce an extension to their operating agreement.
"The planned evolution of our relationship with EBay is consistent with our strategic direction and growth opportunities and does not alter our financial guidance", PayPal spokeswoman Amanda Miller said.
"There is no denying eBay has got its groove back and a series of shrewd moves by management has the company reinvigorated and well positioned for future growth", Tom Forte, analyst at brokerage D.A. Davidson & Co wrote in a note.
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EBay has signed a deal to make payments platform Adyen its main payments processing partner, also in North America. PayPal has played an integral role in processing payments on EBay for 15 years and offers credit products that help EBay shoppers buy more goods.
PayPal's business with eBay is big and still growing: it was up 10% in the fourth quarter of 2017.
EBay, which reported earnings on Wednesday, brought in $2.61 billion in revenue during its latest quarter.
For the quarter ending March, eBay forecast revenue between $2.57 billion (1.81 billion pounds) and $2.61 billion and adjusted earnings of 52 cents to 54 cents per share.
EBay said its gross merchandise volume - the value of all goods sold on its websites - climbed 9.7 percent to $24.43 billion in the fourth quarter ended December 31.