PayPal's CFO says its new partnership with Facebook Marketplace could dwarf the business it does with eBay
- PayPal is eyeing a July 2020 deadline that will allow the payments processor to begin working with some of the largest marketplaces in the world, John Rainey, the company's CFO, told Business Insider.
- For the past five years, PayPal has been unable to work with a handful of large marketplaces due to an operating agreement it signed with eBay, its former parent company.
- PayPal recently announced partnerships with Instagram and Facebook Marketplace as well, the latter of which Rainey said could eventually end up being a bigger customer than eBay.
PayPal has its sites set on what it views as greener pastures as the last vestiges of its agreement with eBay come to a close.
July 2020 represents a key turning point for the company, as a five-year agreement it had in place with eBay, it's former parent company, will end.
When PayPal split from the marketplace in 2015, a five-year operating agreement was drawn up. Part of the deal included a "favored-nations clause" under which PayPal was required to give eBay better pricing than a handful of companies eBay considered competitors.
Starting next summer that agreement ends, offering PayPal the chance to further broaden its horizons, John Rainey, PayPal's chief financial officer, told Business Insider.
"Once we are sort of freed of those shackles next year, it gives us an opportunity to go do things with some of these other marketplaces," Rainey said. "It just gives us a freedom that we didn't have before."
Read more: PayPal's CFO believes AI can save the company $25 million a year by automating one area of customer service
The names of the companies eBay considers competitors have been redacted from the clause, but Rainey said it's fair to assume they include some of the biggest marketplaces in the world, such as Amazon.
In particular, the non-US firms on the list represent some of the most exciting partnerships, Rainey said. PayPal brings with it an entire community of potential consumers that marketplaces in certain regions might have previously struggled to tap into.
"What matters to both marketplaces and large merchants is sales. And so how are you going to increase my sales?" Rainey said. "Assume that there is a big marketplace in China [on the list] that is probably pretty Chinese-centric. What would be appealing to a company like that is that we bring 277 million customers that can then shop at that marketplace."
In the meantime, PayPal sees other growth opportunities
That's not to say PayPal is in a holding pattern until July 2020. Even if PayPal isn't able to coordinate deals with other marketplaces or platforms, Rainey is still confident in the growth that will come from recent partnerships.
In March, the company announced it would process payments for purchases made on Instagram. PayPal also recently announced plans to work with Facebook, as it looks to further develop its own marketplace.
"There has been buying and selling that has taken place on there before, but it is not a curated marketplace," said Rainey of Facebook Marketplace. "They are doing that now, and we are going to power the payments behind that. So it's a pretty significant deal. ... The Facebook agreement alone could dwarf what eBay is."
See more: PayPal and eBay finalize new agreement
To be sure, eBay, which is one of PayPal's largest customers, representing $60 billion of total purchase volume, has also considered new partnerships. In January 2018, the online marketplace announced intentions of moving to Dutch-based Adyen as its primary payments processor when its operating agreement with PayPal ends in 2020.
However, customers looking to use their PayPal accounts on eBay after the agreement ends will still have the option, as the two sides made a new deal that will last until July 2023. However, Adyen will serve as the primary payments processor, handling all credit and debit purchases, a job previously held by PayPal.
Rainey cited companies like Uber and Airbnb as partnerships PayPal hopes to continue to foster. He compared eBay's declining volumes to that of the next 20 largest marketplaces and merchants PayPal works with, which represent $90 billion in total purchase volume. The latter, Rainey said, is seeing volume growth at nearly 40% annually.
"eBay is not as relevant as it was 10 years ago," Rainey said. "When we look at where we want to tie our balloon to companies in the future, we want it to be those large and fast-growing technology platforms."