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In its latest effort to increase user confidence in its e-commerce platform -- and to boost use of its
PayPal payment service -- eBay (Nasdaq: EBAY) 
will offer full protection against fraud to purchases made with PayPal.
eBay buyers who complete eligible transactions with PayPal will be able to get 100 percent of their purchase price back, with no price cap, the company said. Sellers who are paid via the service will also gain enhanced protections.
The auction giant made the announcements during its annual eBay Live trade show, held this year in Chicago. The moves represent an extension of efforts put in place earlier this year by relatively new CEO John Donahoe, who has pledged to revive growth in eBay's core auction platform by boosting user confidence that transactions will be completed.
The new protections will "give all buyers and sellers more confidence and trust," said Lorrie Norrington, eBay's president of marketplace operations. "Buyers who pay with PayPal on eBay will be covered, with no limits, on most transactions."
In addition to the PayPal protections, eBay announced it will offer its highest-rated Power Sellers discounts of 20 percent on final value fees -- a perk meant to get them to list more items for sale -- and additional discounts on UPS shipping services.
Boosting Already High Usage
PayPal is already used on the vast majority of eBay auctions, but the company is eager to see its use expanded even further both on its own platform and elsewhere on the Web. Currently, 97 percent of eBay.com listings offer PayPal as a payment option, eBay said, and more than 90 percent of active eBay users in the United States have PayPal accounts.
The buyer protection plan will cover eligible transactions on eBay in cases where the item is paid for but not received or received but not the item the buyer thought he was getting. Later this year -- in time for the holiday shopping season -- PayPal will remove coverage limits on the buyer protection, allowing items of any size to be fully refundable.
Sellers will also gain more PayPal protection, gaining a buffer against claims, charge-backs and reversals in instances where a payment was made without authorization by the account holder or when an item never reached its destination. The protection will extend to shipments made to 190 markets where PayPal is now accepted.
Looking for Growth
The enhanced benefits for PayPal underscore both eBay's desire to boost its payment subsidiary and its understanding that increasing consumer confidence in its platform is essential for additional growth, Forrester Research Principal Analyst Sucharita Mulpuru told the E-Commerce Times.
"Buyers need to trust eBay sellers will deliver what they say they will when they say they will," she said. "Especially at the holidays, users will go to someone they trust to get their purchases to them on time and accurately."
eBay has said it believes it is well-positioned to thrive in a tougher economy or even a recession, as consumers seeking bargains will turn to the site. Still, even bargain-hunters want to be confident they'll get what they pay for, Mulpuru added. "The bigger picture for eBay itself is to get more buyers to show up, which will convince sellers to list more and help build out the platform."
The Other Shoe?
eBay stirred up significant dissatisfaction among its users in Australia when it announced a plan to require that all transactions on its marketplace in that country be paid for with PayPal. The outcry was loud enough for eBay to say it will not move to implement the change immediately.
Still, that is clearly the direction eBay wants to move, since it essentially gets paid twice on every transaction paid for with PayPal -- once when it receives a cut of the auction proceeds and again when it takes a fee for processing the PayPal payment.
Perhaps just as important to eBay is growing PayPal use overall, something that would logically follow if more users get into the habit of paying with the service on eBay. The market for alternatives such as PayPal that don't require a credit card number to be entered for each transaction is growing due to worries about identify theft and privacy, Gartner (NYSE: IT) Distinguished Analyst Avivah Litan told the E-Commerce Times.
"Consumers are interested in alternative payment methods right now," she said. "This is an important window of opportunity for the PayPals and BillMeLaters to get shoppers comfortable with their services."
Merchants are beginning to recognize that consumers want more choices and are rapidly adding alternatives alongside traditional choices such as credit card payments, with the trend likely to be even more noticeable during the coming holiday shopping season, Litan added.
The recent initiatives were not enough to help eBay avoid being caught up in a Wall Street downdraft, with the stock losing more than 2.7 percent in afternoon action to US$28.40.
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