Digital Transactions Authoritative, insightful and timely information for payments professionals
When eBay Inc. late last month announced it will no longer allow so-called third-party checkout services after June 30, 2011, the San Jose, Calif.-based online auctioneer’s policy shift attracted plenty of attention. Less noted was a decision, announced at the same time, to allow payment gateways other than PayPal to operate on eBay for the first time. Starting this month, Authorize.Net will begin processing transactions for eBay sellers, followed in October by its corporate parent, CyberSource Corp.
Up to now, only the Payflow gateway operated by PayPal Inc., a unit of eBay, has been permitted to process for eBay sellers. Officials at eBay refuse to say how many sellers use Payflow or what percentage of transactions traverse the gateway. Since gateways require a merchant account, sellers would likely be full-time merchants, many of them with their own storefronts. CyberSource clearly sees the new policy as a net positive. “It’s a nice opportunity for our business,” says a company spokesman.
Gateways funnel transactions from online merchants to back-end payment processors and at the same time typically perform risk-detection routines to control fraud. Mountain View, Calif.-based CyberSource, one of the largest U.S. gateways, was acquired last month by Visa Inc. in a $2 billion deal the card network announced this spring (Digital Transactions News, April 21). CyberSource bought American Fork, Utah-based Authorize.Net three years ago, in part to gain access to Authorize.net’s roster of mostly small merchants (Digital Transactions News, June 18, 2007).
Jay Hanson, vice president of product at eBay, says the decision to add CyberSource and Authorize.net boiled down to two criteria. “They are the most popular and largest gateways, and are the ones used by the bulk of our sellers,” he tells Digital Transactions News.
Indeed, a significant number of eBay sellers, many of them smaller merchants of the sort served by Authorize.net, use one or the other gateway on their own sites. “We have a large footprint,” says Justin Brown, product manager at Authorize.net. “A merchant might have a large Web store but also sell on eBay. We have a number of merchants that overlap.”
In view of that fact, eBay approached the two gateway companies when it decided the time had come to add other options besides PayPal. “They reached out to us,” says Brown. “It’s a recognition of the place the Authorize.Net and CyberSource platforms have in the marketplace.”
The move dovetails with eBay’s new policy on checkouts, or merchant interfaces that stand between online shoppers and the payment services merchants use. After the end of June next year, only the eBay checkout, with enhancements including the expanded roster of gateways, will be permitted. The company says the impact should be small, since less than 10% of sales currently flow through third-party checkouts. But the decision to ban third parties has garnered significant press, largely owing to eBay’s size and share of e-commerce.
The new policy also follows eBay’s decision two years ago to require electronic payments in all but a few high-ticket merchandise categories (Digital Transactions News, Sept. 16, 2008). At the time, only PayPal and ProPay, an independent sales organization based in Orem, Utah, were allowed, regardless of the merchant’s checkout service. Since then, eBay has added Paymate, an Australian processor, and Moneybookers, based in the U.K. Transactions charged directly to credit and debit cards are also permitted.
