eBay Inc. adds Bill Me Later to Portfolio

By: Richard Brewer-Hay

In a move that helps extend eBay Inc.’s leadership in online payments, the company announced that it will acquire Bill Me Later, a leading provider in the industry, for approximately $820 million in cash and $125 million in outstanding options. Subject to various closing conditions, the deal is expected to be completed by the end of the year.

The deal offers strong synergies within the eBay Inc. portfolio. Bill Me Later can offer its deferred payments and promotional financing service to the tens of millions of customers who use eBay and PayPal. In return, PayPal can expand its customer base to 1,000 of the Web’s most popular retailers and to the millions of online shoppers who prefer Bill Me Later.

“Bill Me Later is a natural addition to our portfolio; PayPal and Bill Me Later belong together,” said eBay Inc. CEO John Donahoe. “We now have a powerful combination of two leading, complementary online payment products, each with proven benefits for consumers and online merchants.”

Founded in 2000 and headquartered in Timonium, Maryland, Bill Me Later is a leader in the online payments industry with its popular Bill Me Later product and flexible financing programs. Currently, the Bill Me Later network includes hundreds of top-tier merchants including: Apple, Borders, Bluefly, JetBlue, Toshiba, Toys “R” Us, Walmart.com, Zappos and many others. Millions of consumers rely on the safety and convenience of Bill Me Later’s payment solutions when shopping online, via phone and in-store.

“PayPal and Bill Me Later have a similar vision to dramatically streamline and improve the experience for customers shopping online,” said Gary Marino, chief executive officer of Bill Me Later. “This deal helps us to accelerate that vision by offering our products to millions of customers who already use eBay and PayPal.” Marino will continue to run Bill Me Later as a separate business unit and reporting to PayPal President Scott Thompson.

For more information regarding this news and to access additional presentations and documents related to all of today’s announcements, please visit http://blog.ebay.com/news.

Cheers,
RBH

The following interview with Scott Thompson appeared on the eBay internal blog early this morning:

Why is eBay Inc. Acquiring Bill Me Later
This acquisition helps extend eBay Inc.’s leadership in online payments by combining Bill Me Later’s unique transactional credit and promotional financing expertise with the global payments platform of PayPal.

Simply put, eBay, PayPal and Bill Me Later are stronger together.

Bill Me Later has one of the industry’s leading credit-decision capabilities and underwriting techniques, which has continually outperformed the consumer credit industry average. eBay and PayPal will benefit from Bill Me Later’s credit risk expertise; while PayPal’s and eBay’s expansive transactional data will strengthen Bill Me Later’s underwriting model.

Together, PayPal and Bill Me Later can better meet consumers’ needs by providing quick and easy access to online payments, transactional credit and promotional financing. And, with one payment relationship, retailers and eBay sellers will have access to the Web’s leading payment services, which will help increase sales and deliver higher average selling prices.

How does Bill Me Later work?
Bill Me Later enables merchants to offer flexible, customized financing and deferred payments to buyers at point-of-sale.

To use, consumers simply select Bill Me Later to pay at a participating merchant’s checkout, and enter top-of-mind information such as date of birth and the last four digits of their social security numbers. Bill Me Later uses a real-time credit model to make decisions about credit within seconds, so consumers don’t have to complete a lengthy application prior to making a purchase. Customers buy the items they want, and they receive a bill for those items in the mail.

Does this acquisition move PayPal closer to competing directly with credit cards?
Right now, our focus is on continuing to build our online payment service. PayPal has always offered various online credit products for our customers in partnership with GE Money (PayPal Buyer Credit, PayPal-branded MasterCard, eBay-branded MasterCard) and will continue to do so.

The banks and card associations are – and will continue to be – important partners to PayPal. In fact, more than half of our total payment volume is funded with credit cards, so we drive significant volume to the banks and card associations.

Will the addition of a credit product negatively impact PayPal’s funding mix?
On the contrary, we think Bill Me Later could have a long-term positive impact on funding mix. The majority of Bill Me Later’s customers make payments directly from their bank accounts. In addition, transactional credit products create a separate revenue stream for PayPal.

PayPal already has a competing product with Pay Later. Will PayPal continue to offer Pay Later?
One of the best things about Bill Me Later is how well it complements PayPal’s existing products, including Pay Later. We’re going to look at both products and take the best pieces of each to create an even stronger service for merchants and consumers.