[fc-discuss] Financial Cryptography Update: eBay migrates to the Payments business

iang@iang.org iang@iang.org
Wed, 12 Oct 2005 15:51:39 +0100 (BST)

( Financial Cryptography Update: eBay migrates to the Payments business )

                            October 12, 2005




Jim points out that eBay is to purchase the VeriSign payments gateway

eBay’s PayPal said the acquisition would enable it to include new
small- and medium-size business customers in its user base, as well as
expand its repertoire of payment processing options. Recently, many
startups have entered the online payments business, especially those
targeting the market that has sprung up around the purchase and sale of
digital content.

This adds further strength to the thoughts that came out of the Skype
purchase.  eBay is moving into the payments world in a big way;  it's
establishing a stable of user bases that all trade money around a
common payment system.

So why Skype?  Firstly, the Skype user base chews through lots of
little payments in the SkypeOut service.  And they aren't going to stop
doing that.  Secondly, Skype is secure (**) and has a downloaded client
base with a plugin architecture.  For business people that's very
ho-hum, but for students of money, that's golden.  Thirdly, Skype has
the communications future all sown up:	it's chat and it's IM.	The
significance of this is immense when you consider that PayPal is web,
it's email, and it's ridden with fraud with no end in sight.

And, what held back Skype?  Access to payments.  Within their world,
people had to work very hard to get money into the accounts so they
could do the SkypeOut thing.  Obviously nobody was that interested in
helping Skype get access to payment systems on a mass scale.  With
eBay's clout, and VeriSign's mature payments business this is a solved

Look for Skype to integrate a payment system some time.  It might be
branded PayPal but it probably won't be the same thing under the hood
(or bonnet).  Also, look to eBay buying more user bases and more
facilitation architecures (e.g., plugins) that are small-payment
oriented.  (I can think of one right now, but people will be angry if I
state it ...)

Risks:	the same thing that happened to Bill Gates when he said he
wanted to get into payments.  When the banks realise that eBay is
building a bigger and better payments infrastructure, they will
complain to their mamas and papas and ask them to go beat up the bad
boy.  (Problem is, the rationale for discrimination of payments v.
banking v. business is pretty darn weak these days, so if eBay has its
eye on the ball, this won't be the slam dunk that Bill G had to

Recommendation:  eBay is probably a buy if this is really their

(**) I mean here, more secure than the alternate which is approximately

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