INTERMEDIATION
eBay, the iconic auction marketplace that connects consumers to merchants, has announced that they will “intermediate” payments on its marketplace platform by selecting Netherlands-based Adyen to become its primary payments processor and reducing the use of the iconic payments processor PayPal. PayPal, once owned by eBay and a long-time eBay partner, will continue to be another payments option available to buyers.
Anyone, myself included, who has purchased merchandise through eBay and paid through PayPal has noticed that the purchaser must have a PayPal account linked to their bank, debit-card, or credit card and that you are redirected from eBay’s site to PayPal’s site to authorize payment and then re-directed back to eBay to complete the transaction.
Clearly, eBay has used the wrong word. We often hear about disintermediation, the reduction in the use of intermediaries between producers and consumers, but to intermediate would be to insert an intermediary into the process. I believe the correct terms should be “integration” as the function is already supplied by an intermediary, but will tightly bound systemically and managed by eBay to offer the customer a seamless shopping experience.
For merchants, you must have a PayPal account and be subject to their almost dictatorial powers, sometimes losing your hard-earned money in a pre-sale process and other glitches.
“The two issues that are most commonly voiced by actual merchants are complaints of sudden account freezes that disable the merchant’s ability to accept further transactions and withdraw money, and poor experiences with customer service. Merchants who complain of experiencing holds often report difficulty in getting explanations of why the hold was established.” <Source>
The spin …
"As a leading global commerce company, eBay believes that payments intermediation is strategically important to improve the buyer and seller experience on its platform and will enable the company to further innovate on behalf of its customers. In a rapidly changing and competitive e-commerce landscape, shoppers expect to be able to both shop and checkout on the site on which they transact. As eBay intermediates payments, shoppers will be able to complete their purchases within eBay."
According to eBay Chief Executive Devin Wenig,"We believe that we can offer a more seamless experience while giving buyers and sellers more choice for payment and payout options."
The timing …
"eBay will begin payments intermediation on the Marketplace platform on a small scale in North America starting in the second half of 2018, expanding in 2019 under the terms of the Operating Agreement with PayPal. In 2021, eBay expects to have transitioned a majority of its Marketplace customers to its new payments experience."
What is not mentioned …
As they say, the devil is in the details, in this case, those unilateral take-it-or-leave-it “terms of use” agreements that often convey significant legal and financial protections to the company at the expense of the user. By taking control over the payment process and the merchant payment system, eBay exerts more control over merchants. Control which allows them to unilaterally and profitably withhold funds as collateral against future returns, increase processing charges, settle disputes in favor of the customer over the objections of the merchant, and possibly preventing class action lawsuits by mandating arbitration as the primary method of dispute resolution.
While this means little or nothing to the consumer, employees of eBay who support PayPal integration and employees of PayPal might be caught up in environmental changes. For merchants, this means transitioning to what is little more than a start-up backed with significant venture capital and ceding control to yet another company.