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The news today is that eBay is going to spin off PayPal into a new and separate company.

This should be great news for PayPal adoption, because any site that competes with eBay (i.e. Amazon) has been reluctant to take PayPal.

What this means for Magento is not clear, however.

eBay purchased the Magento platform a couple of years ago for nearly $500 million, as a way to ensure that the payment method would continue to be a strong payment option in the leading eCommerce software platform.

By controlling the development of the Magento platform’s software, eBay could ensure that PayPal was tightly integrated and was offered as a default option to everyone.  This strategy has worked well.  Most merchants running Magento offer PayPal as a payment option.  It’s especially important for mobile and tablet users, who don’t want to type in a credit card number, billing address, etc into a shopping cart system.  Instead, they can pay with their email address and PayPal password.

PayPal has been advertising on TV quite a bit recently, and pushing the perception that security is better with PayPal, as you don’t have to share your credit card number or bank account.

I think that this is a reason why paying via an electronic check online hasn’t taken off.  I think that consumers want a layer between themselves and their bank account credentials.  If your credit card is compromised, it’s easy to get a new one.  If you bank account is hacked, there’s a lot less protection, and it’s a much more difficult process.

Apple’s new payment method may also be a reason for this move by eBay to spin off PayPal into a new company.  Available now on the iPhone 6 and 6 Plus, as well as on the forthcoming Apple Watch, the Apple Payment gateway system using NFC (near field communication) keeps another layer between the end store and your end bank account.

Magento now has about 30% marketshare in the eCommerce space.  With roughly 3,600 sites running Magento Enterprise, and 250,000 top sites running Magento Community, it’s a dominant platform.

No news yet from the folks at Magento on what this means for the eCommerce platform, or if Magento will be spun out with PayPal, or remain part of the eBay family.

eBay recently killed off the lower-end Magento Go platform, which was a hosted storefront option for merchants, and instead seems to be focused on going upstream for bigger sites with larger eCommerce footprints.

All in all, I think this is probably a good move for PayPal, and will help the system adopt even more users.

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