Last week, payments service PayPal spun away from Ebay EBAY -4.00% and began a new life with a market value almost one-and-a-half times the size of its former parent. Some investors are excited about PayPal’s future. And if you’re a smallbusiness owner, you should be more than excited. You should be thrilled. That’s because PayPal’s newly earned independence will, in my opinion, impact you in a few very significant, and positive ways.
To begin with, PayPal is no longer constrained by Ebay. “As independent companies, we expect eBay and PayPal will be sharper and stronger, and more focused and competitive as leading, standalone companies in their respective markets,” the company said in its recent filings with the Securities and Exchange Commission. “EBay and PayPal also will benefit from additional flexibility and agility to pursue new market and partnership opportunities.” The company is now free to do deals with other e-commerce giants, like its former enemies Amazon and Alibaba . If you’re an Ebay merchant your customers will still be able to benefit from PayPal’s processing services. But if you’re one of the millions of small businesses who do business through other big (and small) e-commerce sites that compete with Ebay you will soon have the option of accepting payments using PayPal and reaching the company’s enormous community of potential customers. You will find new markets. Your customers will have more choices. And other payment services will face more competition from their participation, keeping your costs lower.
PayPal’s spin-off could be the tipping point for mobile payment acceptance and growth. A few weeks ago I complained that great mobile payment technologies like Apple AAPL -5.66% Pay and Google Wallet are still not catching on, mainly because small merchants are not yet jumping on board. I believe that PayPal will change this dynamic. PayPal jumped into this world with its acquisition this past March of Paydiant, a white label mobile payments technology used by big box retailers like Walmart and Subway that already processes billions in mobile payments. Now, unencumbered by Ebay, my prediction is that PayPal will complement its Paydiant division and leverage its brand and expertise as a payments intermediary by striking deals with both Apple and Google so that payments can be processed via PayPal using any of these platforms. This means that your customers (and you) won’t have to choose sides. Payments will be easier to make (and accept) whether a customer is an iPhone or Android user. Apple, Google and Braintree merchants will see this as an opportunity to grow their mobile payments base through a single channel that already has strong brand loyalty among its enormous community of small business merchants. You will benefit from the ease of use and mobile’s promise of lower overhead and people costs, coupled with more marketing, rewards and loyalty opportunities that can be gained if more customers are making payments on their mobile devices.
With PayPal’s independence, banking will be more democratized. Customers around the world will have more payment choices available to them, whether it’s by using credit cards, paying online, paying with an app or a mobile device or through digital currencies like Bitcoin and these choices will be delivered through PayPal’s single, consistent interface. PayPal’s CEO Dan Schulman recently wrote. “Although mobile devices are now nearly universally available, we still need to close infrastructure gaps in remote and underdeveloped regions where people still lack access to communications networks. We’ll also need to support efforts to provide everyone with a reliable digital ID to use for financial transactions.” PayPal’s aim is to securely expand the ease of making and receiving payments wherever your customers are and giving everyone more choices. This will have the effect of neutralizing the influence of the banking industry. And the banking industry is nervous.
Other recent moves show that PayPal is setting its sights on small business owners like you and I. “As an independent company, we see a tremendous opportunity for PayPal to expand our role as a champion for consumers and partner to merchants,” Schulman also said separately. “And to help shape the industry as money becomes digital at an increasingly rapid pace.” Shortly after its spin-off last week the company released a newly upgraded invoicing product where business owners can better categorize products to better reflect the quantity of units sold, time for services and dollar amount, accept partial payments and improve communications surrounding the invoicing process. The company also just acquired Xoom, a payments service that will make international transactions easier, particularly for smaller merchants. The company continues to invest heavily in its 2013 acquisition of Braintree, a service that helps businesses setup and automate the online payments process.
PayPal has its detractors, and its challenges. Customer complaints are stillcommon. The company faces stiff competition from other payment providers, from Square to Stripe. Some accuse their online wallet of being “clunky and less than user friendly.” Others are concerned about the company’s lack of control over key hardware and software in the mobile space. A few vocal critics accusePayPal (or “PreyPal” as they prefer to call it) of being a “middleman pretender” and are concerned about the company’s history of “horror stories.” I get that and respect their concerns. But I’m excited about PayPal’s future. If things fall into place, I believe the company will help business owners like myself navigate the complicated payments world, help us keep our costs down and create new markets.
Author’s note: My company has performed services for PayPal in the past, but it is not a current client.
Besides Forbes, Gene Marks writes daily for The Washington Post.