Why eBay could still make a comeback in the second half of 2014 (Part 5 of 7)
Paypal’s showing stronger revenue growth
Paypal continues to become an important business for eBay (EBAY). As the chart below shows, Paypal’s showing faster revenue growth than the eBay Marketplaces business. Paypal revenue contribution has increased from 44.8% in 2Q13 to 47.2% in 2Q14.
Although the eBay Marketplaces business was somewhat affected by the cyberattack that happened in May, Paypal continued to show strong growth. The company is also taking a few initiatives to grow Paypal even more. Let’s discuss these initiatives below.
eBay’s taking a number of initiatives to grow Paypal
During the company’s conference call to announce earnings, eBay’s management mentioned that Paypal signed an agreement with GE Capital, a financial services unit of General Electric (GE), last quarter to offer a dual-branded credit card. It also mentioned that it has committed to purchasing the associated loan portfolio of an estimated $1 billion in 2016. This will help Paypal offer more credit to merchants and consumers.
Paypal has also started to leverage eBay’s data to extend credit to small merchants who need capital. In this regard, it has started to loan them up to $1 million per day.
eBay is taking these efforts to also ward off increasing competition in the payments processing market. Google (GOOGL) Wallet is a mobile payment system that allows its users to store credit and debit cards and make payments by simply tapping their mobile phones on any Paypass terminal at checkout through the use of near-field communication (or NFC) technology. Then there’s Isis. Isis is a joint venture between AT&T, Verizon (VZ), and T-Mobile (TMUS) that was announced in November 2010. This system is also based on NFC technology.
Browse this series on Market Realist:
- Part 1 - Why did eBay’s operating margins decline in 2nd quarter 2014?
- Part 2 - Why eBay’s 2014 database breach was one of the worst ever
- Part 3 - Why eBay’s recovery from its data breach will be slower in Europe
- Information Technology