eBay plans to make PayPal a separate entity

Friday, October 3, 2014 - 09:06 by Mike Price

Online auction giant, eBay, has long been the steward of PayPal, the payments firm that handles millions of transactions worth tens of billions of pounds each year. But now, PayPal is set to be spun off into a company in its own right over the next 12 months, according to Legal Week.

At the moment, PayPal is experiencing revenue increases of 20 per cent a year, making it a more impressive performer than eBay. And analysts predict that it could soon eclipse its current parent firm in terms of the amount of cash it generates, which is why the need for a separation was seen.

It is expected that over the course of 2014, more than one billion transactions carried out using smartphones will have been handled by PayPal’s systems, since for many people, it is the best way to pay when carrying out safe shopping online.

The rise of mobile payments has certainly helped to fuel growth at the company in recent years, enabling it to break free of the restrictions of desktop e-commerce and enter other markets.

But while PayPal is likely to continue its meteoric rise in its new form as a distinct business and brand, there are concerns about eBay’s ability to secure global growth in the long term.

Losing PayPal will not only cost eBay in terms of revenue, but will also mean that it does not have access to the vast amounts of data that the payments firm gathers from the huge numbers of transactions it handles.

In the world of safe shopping online, data is an incredibly valuable commodity and means sites can improve the experience of shopping for customers, while also developing better security measures to tackle threats. So the future of eBay may not be as bright without PayPal onboard.