PayPal: little threat from Visa-CyberSource deal
NEW YORK |
NEW YORK (Reuters) - EBay Inc's (EBAY.O) PayPal Inc will be able to keep its share of the growing U.S. e-commerce transactions industry despite Visa Inc's (V.N) bid to compete with it, the Web payments company's president said on Thursday.
Visa agreed on Wednesday to pay $2 billion, or a premium of nearly 34 percent, for CyberSource Corp CYBS.O, a company that helps retailers accept online payments. Visa, the world's largest credit and debit card processor, said the deal would help it compete with PayPal in e-commerce.
PayPal President Scott Thompson told Reuters in an interview that it would not be in the interests of either CyberSource or Visa to try to cut PayPal out of the picture.
"In order to have a viable gateway service, on behalf of the merchant that you are supporting, you've got to offer all the payment options," Thompson said of CyberSource.
Competition in the sector is complicated by the entangled relationships of the processing companies. CyberSource connects retailers with several types of online payment methods, including both Visa and PayPal.
People who shop online at those retailers can then choose whether to use Visa, PayPal, or other processing companies like MasterCard Inc (MA.N) to pay for their purchases.
Visa relies on PayPal for a lot of business, he added.
"We certainly bring them tremendous incremental electronic transactions that they wouldn't otherwise see," Thompson said.
Thompson said he did not expect PayPal's partnerships with CyberSource or Visa to change, though he conceded that the announcement of their deal had taken him by surprise.
Visa processes about 45 percent of U.S. e-commerce transactions. PayPal handled about 16.5 percent in 2009, but that amount has been enough to worry Visa, which has limited room to grow in traditional U.S. credit and debit card processing.
Visa's chairman and chief executive, Joseph Saunders, said on a conference call Wednesday that the deal for CyberSource "is somewhat in reaction to" PayPal.
(Reporting by Maria Aspan and Phil Wahba, editing by Matthew Lewis)
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No matter how dysfunctional is PayPal in fact, it would have been eating into the payments processing area that has for very many years been the purview of “all the banks” via their partnerships with Visa and Mastercard.
In this story these two executives are simply being diplomatic. Thompson from PayPal will undoubtedly be simply terrified by this development.
The fact always was, that once Visa and/or Mastercard offered an effective card/terminal-less payments processing interface, PayPal was going to be effectively dead in the water. And I am happy to say that this development will give the chief headless turkey at eBay, John “Peter Principle” Donahoe, some tasteless food for thought also.
Let’s not kid ourselves, Visa’s Saunders has every intention of sending PayPal to the bottom of the ocean; he wants to add PayPal’s 16.5 percent to the 45 percent of payments processing that he already has, and anyone who thinks otherwise is as naïve and delusional as John Donahoe.
PayPal will revert to being simply a rump of whatever is by then left of the Donahoe-disrupted eBay Marketplace.
And how is it that Visa will be able to so quickly dispatch PayPal to the bottom of the ocean, to join its ugly mother ship, eBay, who is at this very moment preparing to go submarine? Because Visa will have the support and backing of their partners, all the participating banks, who better “know” the entities to any transaction than PayPal ever possibly can.
PayPal’s material problems are its totally primitive and, for many sellers, extremely inconvenient and clumsy, risk management processes (PayPal can never ‘know’ the entities to any transaction the way the banks can) and their totally unsatisfactory mediation process if something does goes wrong, as it can do, particularly with purchases transacted on their slowly sinking hulk of a mother ship, eBay.
There is no question that the card-less PayPal process is very convenient—particularly for buyers—as long as everything is going OK; it’s when a problem arises that PayPal’s gross shortcomings—bordering on fraud or the facilitation thereof—are exposed.
Unlike PayPal (and eBay), the banks offer an effective and professional support system for their payments processing system.
For those with a longer attention span, an evening’s entertainment of details and facts on eBay’s deliberate facilitating of wire fraud on its consumers world wide and a list of links to a number of PayPal horror stories is contained in my post at:
http://www.auctionbytes.com/forum/phpBB/viewtopic.php?p=6502877
eBay/PayPal/Donahoe: Dead Men Walking
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