Merchant Signings Help Fuel Fourth-Quarter Gains for PayPal

E-commerce sales increases outpaced those at brick-and-mortar merchants during the 2007 holiday shopping season (Digital Transactions News, Jan. 14), and that strong growth along with the recruitment of new online merchants gave a fourth-quarter lift to Internet transaction processor PayPal Inc. The San Jose, Calif.-based company handled 203.9 million transactions in the October through December period, up 18% from the third quarter and 22% over the year-ago period, according to numbers released on Wednesday by parent company eBay Inc. as part of its quarterly earnings release. Quarter-to-quarter transaction growth had been modest for the year at PayPal until the fourth quarter, with growth rates ranging from 3% to negative 2%. Meanwhile, PayPal processed $14 billion in payments, a 35% jump over the year-earlier quarter and 21% better than the $11.57 billion processed in the third quarter. What's more, volume from online merchants ballooned 69% during the year. Some 44% of PayPal's volume now comes from online merchants rather than from eBay auction sales, equaling the share claimed by merchant services in the third quarter. That's up from 35% a year earlier, and indicates PayPal's efforts to depend less heavily on auctions by signing up major Web retailers is paying off. In particular, PayPal made significant progress last year among airlines, signing up five air carriers to use PayPal for ticket sales on their Web sites. This includes the fourth-quarter signings of US Airways and AirTran Airways. Other merchant signings in the quarter included ShopNBC and Drugstore.com. PayPal now claims 57.3 million active users, compared to 54.8 million in the third quarter and up 16% over the 49.4 million active accounts on file at the end of 2006. PayPal defines an active account as one that performs at least one transaction in the previous 12 months. The company reported a loss rate of 0.27% of total payment volume, unchanged from the third quarter. Neither PayPal's reported transactions nor its dollar volume includes activity from its online gateway business, which it acquired in 2005 from VeriSign Inc. Separately, eBay announced it had appointed Scott Thompson, PayPal's chief technology officer, as the new president of PayPal. Thompson, a 25-year veteran of the payments business who has been at PayPal for three years, succeeds Rajiv Dutta, who is succeeding John Donahoe as president of eBay Marketplaces. Donahoe in turn is taking over as president and chief executive of eBay, succeeding Meg Whitman, who has announced her retirement, effective March 31.