Recently eBay announced plans to buy VeriSign's cost processing firm for 0 million and merge the processor with PayPal's operations. PayPal is already the largest online cost company; however, VeriSign's processor would make for a profitable asset, by enabling PayPal to compete with credit card associates known for raising retailer fees. The merge will also help take PayPal beyond its core auction-based firm to now tackle small and medium-sized businesses.
VeriSign's cost gateway software creates a direct association in the middle of web businesses and cost processors. These processors are generally run by major banks, therefore cutting out the credit card business. The increasing is expected to add 0 million to PayPal's top line in 2006.
As part of the deal, eBay will also purchase up to 1 million VeriSign safety tokens. Each token has constantly changing numbers that need to coincide with a synchronized central server. These tokens can be embedded in computers and other devices that along with a password, create a two-factor authentication system.
Security has always been a high-priced issue for PayPal as they want a large team to deal with fraud.
This merger is a huge step transmit for PayPal. This shift will allow PayPal to process a greater number of transactions through banks rather than credit cards and work with more businesses than individual sellers. This in turn will lead to less credit card fees and potentially a lesser percentage of fraudulent sellers by working with registered firm owners.
How Ebay Plans to fast improve on PayPal's lowest Line