Will eBay become ePay?

Regular readers of this column will have noted that there are three companies whose names keep cropping up: Amazon, Google and...

Regular readers of this column will have noted that there are three companies whose names keep cropping up: Amazon, Google and eBay.

Despite its failure to make a profit, Amazon is of note for its continuing innovation in the e-commerce sphere. Google manages to combine a useful and free service with a healthy bottom line. Perhaps most impressively of all, eBay is profitable and almost as innovative as Amazon.

In many ways, eBay's latest move could be its most important. For with the acquisition of e-payment company PayPal, eBay may be poised to become the pivotal e-commerce player - one upon which millions of other businesses could one day depend.

I wrote about PayPal nearly two years ago, when it was just one of several we-commerce systems - simple ways for end-users to send money to each other, where the actual money transfer between accounts was handled by services such as PayPal.

Since then, the company has expanded mightily. From four million users back in 2000, PayPal now has some 16 million users - an impressive figure that underlines its complete dominance of this sector, trumping even eBay's own Billpoint payment system.

For background on PayPal, there are some good help pages with explanations of how the system works.

Both the sender and the recipient of funds need to have a PayPal account, of which there are three kinds: personal, premier and business. The first of these can send and receive payments free of charge but cannot accept credit card payments. The other two can, making them attractive for business use. The downside is that there are a range of fees.

As the list of withdrawal fees indicates, PayPal supports many countries. A FAQ explains how international transfers work.

The other notable change at PayPal over the past few years has been a major new emphasis on business. A comparative table of costs shows why PayPal has caught on with some 30,000 smaller online companies as an online payment method, and there are now many resources devoted to such shops, as well as a PayPal developer network.

PayPal also has something called Billpay, which can be used for paying bills using PayPal funds. This indicates where PayPal is heading, as it turns from a simple form of e-mailed money to a comprehensive global online payments system.

It was clearly this that attracted eBay. Although about 60% of PayPal's business already comes from eBay, the other 40% comes from small merchants that have nothing to do with the company. Acquiring PayPal will allow eBay to become a general financial intermediary, rather than just a facilitator for auctions.

In other words, combined with the clout of eBay, the PayPal system could become the long-heralded universal e-cash system. Indeed, if eBay succeeds in assuaging the fears of other companies that it will become too powerful in the online world, it does not seem out of the question that ultimately eBay will become a payment company first and foremost - ePay, perhaps?

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