PayPal goes it alone, but likely not for long

Next year, PayPal will split from eBay and become an independent company.

|
Manu Fernandez/AP/File
Attendees walk in front of an EBay and PayPal display area at the Mobile World Congress, the world's largest mobile phone trade show, in Barcelona, Spain. PayPal is splitting from EBay Inc. and will become a separate and publicly traded company during the second half of 2015.

PayPal's split from long-time partner eBay Inc. makes Carl Icahn mighty happy. But he doesn't think PayPal should stay single for long.

Icahn, who months ago called on eBay to spin off the lucrative online and mobile payment service, continues to believe that the payments field must be consolidated, either by PayPal buying up smaller rivals or by merging with another major player.

"In light of the development of strong competition such as the advent of Apple Pay, the sooner these consolidations take place, the better," he wrote on his website Tuesday in the wake of eBay's announcement that it will split off PayPal by the second half of 2015.

An independent PayPal will be much more appealing to potential customers like Amazon.com who compete with eBay. And PayPal will have more freedom to aggressively take on new mobile pay challenger Apple Pay.

PayPal services $1 of every $6 dollars spent online. It collects fees from over 150 million users who use the online service to send money to other users and pay for goods and services in more than 200 markets. The service posted 20 percent revenue growth in the last quarter to $1.95 billion — representing nearly half of eBay's total revenue. And it's on track to process 1 billion mobile payments this year. The company's PayPal Here and One Touch mobile payment service, which it acquired with the purchase of Braintree, compete with players such as Square and Google Wallet.

The payoff is huge for whichever player can ultimately own the digital wallet space: mobile payments could spike to $58.4 billion by 2017 from just $1 billion last year, Citi Investment Research analyst Mark May said in August. And the pressure is on. Apple Inc., which has 800 million user accounts through iTunes, threw down a gauntlet last month with the announcement of its own mobile payment service Apple Pay, built into the iPhone 6.

So what might be PayPal's first solo move?

Some analysts say the company could be a takeover target. Google and Microsoft, not to mention Visa and Mastercard, have tried to build online payment platforms with varying degrees of success, notes Cantor Fitzgerald analyst Youssef Squali. While Google is unmatched in Internet search, it has struggled with Google Wallet and Checkout, and acquiring PayPal could be a way for Google to quickly secure a leadership position in commerce and payments, R.W. Baird analyst Colin Sebastian has suggested. He also points out that PayPal will end up with a sizable amount of cash and none of eBay's debt.

New CEO Dan Schulman will bring both mobile and prepaid payment experience to the company. Schulman, 56, was founding CEO of Virgin Mobile, before leading the prepaid group at Sprint Nextel and most recently expanding mobile and online pay services at American Express. Citi's May noted that few people have that background in financial services, mobile technology and payments — three key strengths to be competitive going forward in digital payments.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to PayPal goes it alone, but likely not for long
Read this article in
https://www.csmonitor.com/Technology/Tech/2014/1001/PayPal-goes-it-alone-but-likely-not-for-long
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe