eBay to drop PayPal as its primary payment processor

eBay and PayPal have become almost inextricably entwined over the years -- but not completely inextricably. Citing lower costs, eBay has announced plans to drop PayPal as its main payment processor in favor of Dutch firm Adyen.

Starting later this year, eBay will move some of its payments to the new provider, and then by 2020, PayPal will have been replaced as the backend payment service. eBay users will still have the option to use PayPal until at least the middle of 2023.

Following eBay's announcement, PayPal stock dropped by 12 percent. After a 15-year relationship, eBay currently accounts for around 13 percent of PayPal's business.

The move is not entirely unexpected. PayPal has for some time been transforming into a company working with many of the big names in technology, including Apple and Google.

eBay explains the upcoming changes in a blog post:

eBay intends to further improve its customer experience by intermediating payments on its Marketplace platform.  In doing so, eBay will manage the payments flow, simplifying the end-to-end experience for buyers and sellers. eBay has signed an agreement with Adyen, a leading global payments processor, to become its primary payments processing partner. PayPal, a long-time eBay partner, will be a payments option at checkout for eBay buyers.  The transition to full payments intermediation will be a multi-year journey, and eBay will move as quickly as possible to complete this process within the parameters of the Operating Agreement with PayPal, which remains in place through mid-2020.

The company highlights what it perceives to be a number of benefits for buyers and sellers:

For sellers:

 For buyers:

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