PayPal's shares fall after eBay announces new partner

PayPal Holdings Inc's shares fell as much as 12 per cent in after-hours trading on Wednesday (Jan 31) after former parent company eBay Inc said it had signed up a new primary payment processor.

EBay said it will start processing payments globally using Dutch payments company Adyen, allowing its users to remain on the eBay website when checking out.

PayPal said eBay shoppers will still be able to select PayPal as a form of payment until at least July 2023. The news from eBay came as PayPal reported quarterly earnings that beat Wall Street estimates but gave a disappointing outlook for the first quarter. PayPal shares initially fell 5 per cent after the release of the quarterly results.

The chief executive officer of PayPal, Dan Schulman, said on a call with analysts that the changing relationship with eBay was very "manageable" and that it was in line with PayPal's new strategy.

EBay accounts for roughly 13 per cent of total payments processed by PayPal.

PayPal was spun out of eBay in 2015 and has since been working to transform itself from a company that mainly processed payments for its parent company to one that processes payments for other large companies and their customers, as well as for individuals paying family and friends.

PayPal's new strategic direction has led to partnerships with numerous large financial institutions and big technology companies including Alphabet Inc’s Google, Apple Inc, Mastercard Inc, Visa Inc and JPMorgan Chase & Co.