ebay moving to Paypal only

Ebay Australia have announced that they are going to restrict most forms of payment for transactions, with sellers being allowed to offer only Paypal (or cash-on-delivery).

So, as a seller, we will pay eBay fees to eBay and then we will pay our Paypal fees to Paypal, which, in one of those not-so-curious coincidences, happens to be owned by eBay. So, while eBay say it is all about safety, it seems this safety will also increase eBay's opportunities to take a larger chunk of the transaction costs for itself. Nice work if you can get it!

I have to wonder if the buyers are actually clamouring for it. Although I'm a minnow in the world of Lego sales, I have sold on both bricklink and ebay over a few years and I have always offered other Aussies a wide variety of payment methods including Paypal, direct bank deposit, cheque, cash in the post, money order, etc. Now I don't levy any kind of direct or hidden fee for using Paypal so for the buyer the cost to them of using Paypal or direct deposit is the same. Yet almost every Aussie buyer chooses to pay by direct bank deposit with only a couple paying with Paypal. So, this tells me that Paypal is not the preference of Aussie buyers.

And looking at feedback, I have often noticed that most of my Aussie buyers have feedback only from other Aussie sellers. This suggests to me that many Aussie buyers do not wish to engage in international transactions. This suggests to me that they probably don't have Paypal, since the compelling reason for most of us get Paypal is to make international transactions.

So, while ebay buyers and sellers who deal internationally probably do have Paypal (out of necessity), I rather suspect the buyers and sellers who only deal within Australia almost certainly don't. So, all of those people now have a choice:

1) get Paypal -- which is clearly what eBay want them to do

2) stop using eBay

As international transactions do have greater risk, one presumes that the Aussie-only buyers and sellers are more likely to be risk-adverse than the international buyers and sellers. Given that most studies show significant numbers of Australian are still concerned about doing financial transactions on the WWW, I wonder how many of those risk-adverse Aussie-only buyers and sellers will be willing to walk away from eBay due to their reluctance to use Paypal.

I am thinking about a former colleague who used to buy a lot of clothes and accessories from ebay. She used to send cheques through the post as she never did any financial transaction online and didn't even have a credit card (her husband did have one but only for emergencies). I find it hard to imagine that this lady will suddenly embrace PayPal. It will be interesting to see if any of the other Aussie auction sites will see an increase in activity if people walk away from eBay.

Of course, eBay's success depends on the critical mass effect. The sellers come to eBay because there are so many buyers and the buyers come because there are so many sellers. So if some portion of the buyers/sellers walk away, the critical mass effect is weakened, although probably not to the extent of destroying eBay, but it may provide a window of opportunity for a rival site to achieve a critical mass it currently lacks.

Actually what I suspect will really happen is that the other forms of payment will continue but "under the counter". That is, I suspect bidders will email the seller to ask if they will accept other forms on payment and only bid if the seller is willing. I can't honestly see how eBay could police that. So I suspect that a seller offering "cash on delivery" may become a signal for "I accept other forms of payment, please ask me for details". Now I suspect that eBay probably realise that other forms of payment will continue, but from eBay's perspective, if anything goes wrong with these other forms of payment, then the buyer can't blame eBay. That is, I think this move is more about eBay's safety and its profits than about buyer safety.

My prediction is a drop-off of eBay sellers when the May deadline for offering PayPal is introduced, followed by a drop-off in eBay buyers when the June deadline for payment options as Paypal and COD are introduced. I think most of the drop-outs will not move to other auction sites, but will simply delay buying/selling for a while to see how the situation shakes out (i.e. hoping eBay will change its mind). After a while, the drop-outs will be forced to make the decision to either get Paypal, forget eBay (going to other sites in some cases or nowhere in other cases), or get wind of the fact that private payment arrangements can still be made and resume with eBay on that basis.

Frequent ebay users will get Paypal; their need to transact (for whatever motivation) will drive them to overcome any resistance to Paypal. Younger people are more likely to get Paypal (as they are more generally comfortable with online payments). It is the older and occasional buyers and sellers that are more likely to walk away (their need to use eBay isn't desperate and they are too uncomfortable about using Paypal and probably not well-enough connected to discover that under-the-counter payments are still possible).

There are a lot of older people using eBay, so it will be very interesting to see what that group do. Generally for that group of people to move to online payments, they generally have to be coaxed into it by someone they trust who will hold their hand through the process. So if they have a relative or friend who says "but you'll miss using ebay so much, let me show you how my Paypal account works, and I'll help you set it up", it may happen. Without that "word-of-mouth" recommendation, I think they will not touch Paypal with a bargepole.

Since I have Paypal myself, it's obviously not going to stop me buying on eBay if I feel the urge, but I guess I will be suspecting that sellers will be doing more gouging on "shipping and handling" in order to cover the seller's Paypal fees (shipping rip-offs are already rife on eBay and this will only make them worse). As a seller, I will definitely be holding off for a while because of the fear that if the number of buyers are reduced, it must push prices down (basic supply-and-demand theory). Being an occasional buyer/seller on ebay, I think I fit my theory of "delay for a while to see how the situation shakes out", even though I am a Paypal user.

So I shall watch on from the sidelines with interest. I wonder how crowded those sidelines will be :-)