EBay is making a move that could end up being one of the best, and most lucrative of the last several years. The company announced on Tuesday that they would split their fastest growing segment, PayPal, into its own publicly traded company.
This deal was applauded in the immediate moments afterward by investors, and as shares of EBay rose, it was seen that the driving force behind this had little to do with stock shares, or investors.
Though the company will still be owned by EBay, it will give EBay the ability to focus on what EBay does best, and focus on their own ambitions – rather than trying to operate two companies simultaneously are in entirely different arenas.
This is big news for the tech world, with all the buzz in the mobile payments space being around Apple and their newly created Apple Pay. PayPal was purchased by EBay in 2002 for $1.3 billion and has since exploded making it – at least currently – the hottest name in the mobile payments and online payment segment.
Apple Pay may be trendy, but PayPal has been around and has been doing it right for years. PayPal allows users to make payments, or receive payments either with a bank account, credit card or prepaid debit card, instead of risking your credit card information on independent websites, and with independent merchants.
It functions off the same general idea of security – which Apple has been boasting with their Apple Pay. Essentially saying, give us your credit card, or bank information – and we’ll act as a security wall between you, and any purchases you make online – keeping your data confidential.
Earlier in the month, Mark May who is an Investment Research Analyst with Citi said that the total sum of mobile payments executed with PayPal could grow from $1 billion in 2013 to an astronomical $58.4 billion by the year 2017.
This is proof though that the mobile payments segment is where the real competition and real revenue is to be made. Much like any other payment service, PayPal makes money on a per charge basis, which allows PayPal, and others to cash in on a small fee, every time the service is used.
When evaluated like that, it’s easily understood why PayPal needed to split off. It’s quickly becoming it’s own entity anyway, and splitting away from EBay simply gives both companies more flexibility with their strategies going forward.
More importantly though, it puts PayPal in the driver’s seat to take the fight directly to Apple and their new payment platform.