eBay and Square Capital on Tuesday announced a partnership to provide eBay sellers in the United States with access to business financing of up to US$100,000. The funds can be made available in as little as one day.
Square Capital will email select eBay sellers invitations to apply for a loan in Q3, the companies said. Square will determine eligibility and risk, and determine the size of the loan offered.
Loans will be issued by Celtic Bank, based in Salt Lake City, Utah.
“eBay sellers will be able to get funding more easily simply because they have another option available,” said Bianca Crouse, head finance writer for Merchant Maverick.
Square’s approach means sellers “don’t have to go out searching for financing,” she told the E-Commerce Times.
If the relationship is like similar partnerships Square has entered, Square Capital will be integrated with the eBay platform, Crouse said. Square Capital will use information about eBay sellers, such as their transaction history, to make lending decisions.
eBay and Apple Pay
eBay will begin rolling out Apple Pay acceptance on its Marketplace Platform this fall, it said in a separate announcement on Tuesday. The move is in line with its goal of simplifying the end-to-end flow of payments on its platform through an initiative unveiled earlier this year.
Buyers will be able to use Apple Pay on iOS and Safari to make purchases from sellers participating in the initial phase of the managed payments flow, starting this fall.
“The single biggest nonfinancial benefit of integrating Apple Pay with eBay is modernization,” noted Melissa Johnson, head mobile payments writer for Merchant Maverick.
This “will bring [eBay’s] image more in line with that of a company solidly operating in 2018 and beyond,” she told the E-Commerce Times.
However, eBay sellers “may not see a huge benefit, other than a possible slight uptick in sales,” because Apple Pay “is by no means ubiquitous, even among iPhone users,” Johnson pointed out.
“As of December 2017, just 12.8 percent of all adult smartphone users on all operating systems combined had ever used Apple Pay, and not all of those users rely on Apple Pay on a regular basis,” Johnson said, citing data from Pymnts.com.
However, “it certainly won’t hurt [eBay sellers] to accept Apple Pay,” she added.
Increased security will be a benefit to shoppers who use Apple Pay on eBay.
“Apple Pay tokenizes transaction data so card numbers are never actually given to the payment processor,” Johnson pointed out.
Another benefit for consumers is that Apple Pay has launched its own wallet feature, “so its users can store cash balances sent via the Messages app, which they can spend online or in apps,” she said.
eBay’s Payments Management Plans
eBay’s payments management initiative should be available to a majority of Marketplace sellers by 2021. As it expands to more geographies, Apple Pay will be available to more purchasers, on more items, and in more regions.
In the meantime, sellers will not need to make changes to their eBay accounts — they can continue to log into eBay and manage their listings as they do now. They will see new, streamlined dashboards and reports including payments.
However, sellers will have to provide eBay with additional payments-related data and transition to a new relationship with eBay that includes integrated payments capabilities by July 2021, when eBay’s operating agreement with PayPal expires.
Global payments processor Adyen will be eBay’s primary payments processing partner, and PayPal will be a payments option at checkout for eBay buyers until July 2023.
The managed payments flow will reduce eBay sellers’ costs of payments processing, give them a central place to manage their business, and let them reach more buyers and increase conversions, eBay said. It will give buyers more payment options at checkout and an integrated checkout experience.
Getting to the Money
Square Capital only makes loans to merchants that use its mobile point-of-sale terminal.
Borrowers don’t apply for loans. Square, which is a payments processor, monitors merchants’ accounts and invites them to take a loan if they are eligible.
Factors affecting eligibility include the following:
- the volume processed through Square;
- the merchant’s account history; and
- payment frequency.
The loan process is simple, because Square already has most of the information needed, although it may ask for additional documents if necessary. Credit checks are not necessary.
Once Square has verified a merchant’s information, it deposits the loan amount into the merchant’s bank account. It automatically deducts repayments from transactions processed through its service. The loan repayment is separate from Square’s normal processing fees.
Loans run for a maximum of 18 months. Merchants can make additional payments or pay off the loan at any time, but will not get any discounts for doing so.
The payment structure means merchants pay less when business is slow. However, they must pay at least 1/18 of the initial loan balance every 60 days.
Square charges a one-time flat fee, called a “factor rate,” of between 1.10 and 1.16 — which is 10-16 percent — on the loan. There are no other fees.
It’s not possible to calculate the effective annual percentage rate on a Square loan, because factor rates are not the same as interest rates. However, the APR on a Square Capital loan would work out to be about 40 percent, suggested Merchant Maverick.
The effective interest rate for his loan was “in excess of 24 percent,” said “eric,” an acupuncturist who posted a comment on a Merchant Maverick review of Square Capital.
“Crazy interest rates and no prepayment options are predatory lending practices at best,” observed Rebecca Wettemann, VP of research at Nucleus Research.
“What’s eBay’s commission? They should be transparent about this,” she told the E-Commerce Times.
Given the volume of data eBay has on its sellers, and the currently low interest rates, it “could be doing a better job of understanding which sellers use [it] as a primary source of income,” said Wettemann, “and partnering with alternative lenders and advisers that encourage better spending and investment choices — like Stash, for example.”