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Smaller retailers may feel more of the pain, a payment expert says.
PayPal will shut down its online payment system tonight so it can move a data center to a new and undisclosed location, the payment processing service said today. The outage is scheduled to begin at 10 p.m. Pacific time—1 a.m. Eastern—and last 45 to 60 minutes. Consumers and retailers will not be able to log into their accounts during that time.
PayPal, which is owned by eBay Inc., declined to provide more details, but said in a blog that the move will support innovations planned for the coming months.
The outage will certainly have a short-term impact on web retailers, especially those that accept PayPal, says Rick Oglesby, senior analyst and consultant at Aite Group, a financial services research and advisory firm. Larger retailers will probably fare better, as they generally offer multiple forms of payment at checkout, he continues—the key will be to enable customers to use credit cards or other PayPal alternatives.
However, a large number of small retailers rely on PayPal for processing all their payments, including credit and debit card purchases, which could amount to greater losses, he says. However, he adds, “the small ones are probably a lot less likely to be processing transactions at that hour anyway.”
Though retailers can use multiple processors, 73 merchants in the Top 500 Guide and 149 in the Second 500 use PayPal to process payments.
In the long run, the interruption won’t help PayPal’s brand and the company will have to work to mitigate the effects, Oglesby says. But he adds that the situation was probably unavoidable, and that many large technology service providers occasionally face short disruption of this type. PayPal is already making the interruption as painless as possible by timing it for late night in the United States and by announcing the plans in advance, he says.
“There’s no good time to take a payment system down,” he says