Auction goliath, eBay, has changed its terms of use. As of 1st June 2021, vendors will be paid directly instead of through PayPal. What does this mean? Simple. Anyone using eBay to sell products will be able to receive payments directly into their bank accounts as well as through a third-party platform like PayPal.
This change severs the exclusive near 20-year relationship between eBay and PayPal, whom they acquired way back in 2002 and represents the biggest change to eBay’s terms and conditions in decades.
Understandably, such a drastic change has promoted strong opinions amongst individual eBay vendors and businesses who have enjoyed considerable success using the platform to sell their products. Everyone from new and second-hand book retailers to electronics and gadget retailers have been forced to rethink long-established payment models. However, the change has been coming for some time prior to its introduction at the start of June 2021.
The Changes Explained
So, in a nutshell, eBay’s new managed payments system means that the auction site now manages the end-to-end payment process. Vendors can offer customers more convenient payment methods and have any transactions deposited in their nominated account.
In addition to direct bank payments, eBay also allows for transactions to be completed using Apple Pay and Google Pay or credit cards. eBay maintains that the changes will allow vendors to streamline their businesses – in addition to having access to reporting, support, and payment protection all in one place. They also cite the ability to offer customers more ways to pay for vendor products through Apple Pay or Google Pay as being positive for customers, reflecting the changing ways that consumers are paying for goods.
The new payments process is completed in just three steps:
Step One: a buyer makes a purchase
Step Two: eBay manages the payment transaction
Step Three: a vendor receives the payment to their bank account or through Apple Pay or Google Pay
The new payment process will see eBay charge 12.8% of the value of the product purchased, plus £0.30 in the UK and $0.30 in the USA. The old payment process saw eBay take 10% of the value of the product purchased, plus PayPal’s fee and an additional £0.30.
It will, however, take 2 working days for any payments to be transferred, whereas PayPal payments are typically made on the same day.
eBay has also said that although the changes have officially been initiated, it may take a few weeks or more for every vendor to access the payment process. Some may have already started using it. For others, the change is coming.
What Do Vendors Need to Do?
So, like a wholesale process change for anything else, there are several actions that vendors will need to complete to use the process successfully.
All eBay sellers will receive an email invitation asking them to complete the managed payments registration. This should be done by an agreed date, as specified on the email.
As previously mentioned, the rollout of eBay managed payments will be phased. This means that vendors will have plenty of time to switch payment methods. When vendors receive an email invitation they will be invited to register with eBay at which point they’ll need to verify their identity, bank account details and company trading name (if they have one). This allows payments to be initiated to a nominated bank account.
eBay has also clarified that any nominated bank account must be a current or business account. Vendors cannot use a savings account.
By the end of 2021, eBay will have rolled out the new payment process and all vendors will have their payments managed by eBay.
How Has the New Payment Process Been Received?
So, it would be wrong to say that all vendors have been enthusiastic about the new payment process. However, when has any significant change to any digital platform been universally praised?
Some vendors have threatened to abandon eBay should the proposed changes be fully rolled out. Users have mentioned that whenever a buyers raise a dispute with eBay the platform, universally, sides with buyers and directly remove any money from vendor’s nominated business or current accounts.
Other vendors have voiced their opinions on social media, sharing that since the changes, they’ve been charged much higher fees and that funds are taking longer to be released than the 2 working days promised.
Indeed, from an objective standpoint, it does appear as though eBay’s new payment process is more favourable to vendors who sell hundreds, thousands or even hundreds of thousands of products like books. Vendors who concentrate on selling larger value goods at greater cost have voiced their opinion that the additional 2.8% transaction fee is eating into their revenue.
However, it should be noted that eBay’s managed payments process has only been in effect since the start of June.
Does eBay’s Managed Payments Benefit Vendors?
Despite mixed feelings, experts believe that eBay’s managed payments benefits vendors. They have commented that initial scepticism is to be expected in the initial rollout of any new process – especially one that directly affects financial fluidity – however, switching to eBay’s managed payments will certainly benefit vendors in the long run.
How? Well, first of all PayPal will be increasing its own fees. Though not high enough for vendors to see an immediate, marked difference in revenue, vendors can expect to experience a reduction in their earnings.
Moreover, eBay has recognised that more and more people are using digital payment systems like Apple Pay and Google Pay. Having more payment options results in greater appeal to buyers – and therefore allow businesses to expand their service offerings.
Then there’s the obvious benefit that eliminating a third-party transaction model i.e., transactions passing from the buyer to PayPal then being cleared in a vendor’s current account after being held in escrow for a period of time, will mean quicker payments being made to vendors. This will speed up supply chains because the sooner a vendor receives an amount, the sooner they will dispatch the goods.
Now, as with any new process, there will likely be a period of adaption as vendors and consumers get used to operating, however in the long-term end-to-end payment processing will be quicker than third-party transaction processing.
Will This Result in a Rise in eBay Subscriptions?
It’s difficult to predict if eBay’s change in payment model will result in a rise in eBay subscriptions, however streamlined actions result in an increase in user adoption.
You only need to look at the increasing adoption of digital transformation across all aspects of a business to see this. What is apparent is that businesses – regardless of the products they sell, the services they offer or the sector they work in – need to focus on honing the customer experience.
The problem is that often businesses add new innovation to their service offering without fully appreciating the effect that it will have on end users and their own employees. In an age when digitisation is all around us, where many of us can barely get through a single day without interacting with digital technology to some degree, any extra knowledge that we need to access what we need becomes tiresome, frustrating, even annoying.
Businesses, regardless of their size and statue, should constantly be striving to keep things simple. This is exactly what eBay is trying to do by eliminating third-party transactions. In the months and years from now, eBay businesses will surely be happier that they can manage their revenue without the need for a third-party platform like PayPal.
Only time will tell to see how well eBay’s managed payments is received. However, if you, as a business owner, had the choice of streamlining operations and improving customer experience, or you, as a consumer, had the choice of receiving your products quicker or not, which would you choose?
