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article imagePayPal to separate from eBay

By Tim Sandle     Oct 1, 2014 in Business
E-commerce site eBay is is to split away its payments division PayPal. This will mean that the e-bank will be run as a separate company, with eBay's relationship being that of an "arm's length" owner.
The reason for the separation, which had previously been resisted by those in charge of eBay, was set out by boss John Donahoe . Donahoe argues that the logic for running the companies jointly had changed. This is primarily due to "the future growth of mobile payments and mobile commerce."
Talking with the BBC, John Donahoe also said: "A thorough strategic review... shows that keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively."
Another reason is that PayPal is doing much better than its "parent". PayPal's revenues are growing at almost 20 percent each year. This is twice as much as eBay. Although, PayPal's annual revenue is $7.2 billion compared with eBay's is $9.9 billion.
Essentially, the move will allow Pay Pal to compete more independently in what is a growing marketplace of e-payment systems. Growth is set to come from people making ever more payments through the use of mobile devices. While PayPal's position is potentially one of further growth, it also faces the threat of more intense competition, such as from Apple Pay and Alibaba's Alipay, both of which are soon to enter the marketplace.
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PayPal was developed after Internet financial services company X.com acquired Confinity in March 2000. In 2002, the company was sold to eBay for $1.5 billion. The merger was seen as key to the impressive growth for both companies.
The separation of eBay and PayPal is expected to be complete by the end of the second quarter, 2015.
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