| SAN FRANCISCO, March 18
SAN FRANCISCO, March 18 EBay Inc shares
hit a new low for 2013 on Monday as concern mounted about the
impact of a new "digital wallet" fee on the company's PayPal
MasterCard Inc, one of the largest payment networks,
said earlier this year that it plans a new fee for digital
wallet operators like PayPal starting in June.
The actual dollar amount PayPal ends up paying may not be
that large, analysts say. However, they are worried that this is
part of a broader move by payment networks to target PayPal,
which has become more of a direct competitor recently.
"Payment networks are taking the gloves off," Bill Carcache
and Brian Nowak, analysts at Nomura Equity Research, wrote in a
note to investors on Monday. "The incumbents will do everything
in their power to prevent PayPal from riding on their rails
without extracting a toll."
EBay shares slid 0.5 percent to $50.18, on Monday afternoon,
leaving them down about 4 percent so far this year.
Since eBay mentioned the MasterCard fee in a regulatory
filing on Feb. 1, the company has lost about 12 percent of its
market value - while Amazon is down about 1 percent and the
Nasdaq Composite is up 2 percent.
Analysts put that under-performance down to this new fee and
concern about rising tension between PayPal and the payment
"The fact that PayPal, as the largest digital wallet player,
could be singled out by a network like this is clearly a
negative," said Ken Sena, an analyst at Evercore Partners.
PayPal is moving from its online roots into the physical
retailer world, where the vast majority of payments still take
place. It is a big opportunity for the business and that has
driven eBay shares higher in the past year.
However, as a payment option in lots of physical stores,
PayPal will be a much bigger threat to network operators like
MasterCard, Visa Inc and American Express,
Historically, Visa and MasterCard viewed PayPal's success in
the online world cautiously, but they were also happy because
the service generated extra e-commerce transactions that
ultimately got processed through their networks.
"Now that PayPal has started moving to the physical point of
sale, however, competitive intensity levels are rising as PayPal
encroaches deeper into what has traditionally been the
incumbents' turf," Nomura's Carcache and Nowak said.
At a conference last month, Chris McWilton, president of
MasterCard's U.S. Markets, complained that PayPal "rides for
free" on other companies' business models.
"They've got to be cautious that they don't get too big and
start making people wake up and say wait a minute, I'm actually
losing business here because of your moving into the physical
space," he added.
The MasterCard fee will be charged on "staged" digital
wallets, such as PayPal, Google's Wallet, Square,
iZettle in Europe and Intuit's GoPayment, according to
Staged digital wallets share less information with card
issuers and the networks, creating customer service problems and
making it more difficult to deal with card rewards programs,
Carcache and Nowak explained.
MasterCard may be doing this to encourage PayPal and other
staged digital wallet operators to share more valuable
information about where transactions take place and with which
merchants, Evercore's Sena said.
Sena and other analysts are concerned that Visa and other
networks will create similar digital wallet fees.
A Visa spokesman declined to comment on Monday.
If all payment networks assess such fees, but they are
limited to transactions in the United States and exclude
payments on eBay's marketplace, that could shave about two cents
a share off eBay's annual profit, Sanjay Sakhrani, an analyst at
Keefe, Bruyette & Woods, estimated recently.