October 13, 2005, 12:00 AM

PayPal acquires VeriSign gateway to capture more non-eBay business

PayPal’s acquisition of VeriSign Inc.’s $40 billion payment gateway business will help speed PayPal’s expansion of its non-eBay business, says Stephanie Tilenius, vice president of merchant services.

Paul Demery

Managing Editor, B2B E-commerce

PayPal’s acquisition of VeriSign Inc.’s $40 billion payment gateway business will help speed PayPal’s expansion of its non-eBay business, says Stephanie Tilenius, vice president of merchant services for the eBay payment subsidiary.

EBay and VeriSign earlier this week announced that PayPal will pay about $370 million in cash or eBay stock to acquire VeriSign’s payment gateway. The gateway business, including synergies with PayPal’s merchant services business, is expected to generate $100 million in incremental revenue next year.

VeriSign is the leading gateway for small and medium-size businesses, representing about 22% of U.S. e-commerce, Tilienius says. “We really feel this is an opportunity for us to expand our merchant services business,” she says. Currently, about 30% of PayPal’s volume is from outside eBay.

PayPal has been aggressively pursuing the global merchant services market, which represents about $300 billion in annual volume, about 10 times the size of eBay, Tilenius says. “This is a way for us to accelerate adoption of our services,” she says. “We can extend the PayPal product seamlessly into the VeriSign gateway and offer it to all those tens of thousands of VeriSign cutomers.”

VeriSign has more than 150,000 retailers worldwide.

As part of the agreement, VeriSign also will provide eBay and PayPal with a suite of security services that includes the deployment of VeriSign’s two-factor authentication token, which gives customers a one-time password or digital certificate to help protect against online identity theft. EBay has agreed to purchase up to one million of the tokens, which will be rolled out to eBay and PayPal customers beginning next year.

The acquisition is subject to regulatory and other approvals, and is expected to close in the fourth quarter.

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