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PayPal lending to merchants using parent's eBay

ONLINE payment processor PayPal is now starting to finance the merchants who sell on parent company eBay's online marketplaces.

It's the latest challenge to traditional banking which is increasingly being squeezed out of its dominance of finance.

The fast growing technology company is planning to have 1500 staff at its Dundalk and Dublin offices as it emerges as a major Irish employer.

The company already lends money to online shoppers, but it is now targeting lending to businesses.

PayPal has already tested a financing programme for eBay sellers in the UK, and it plans similar tests in the United States this year, a company spokesman said.

"Marketplaces is a great innovation lab for us to test new experiences," Gary Marino, senior vice-president, global financial services at PayPal, said at eBay's investor day last week.

"We've done it successfully with credit and we are experimenting with many new capabilities which will drive share like small business lending."

A UK programme and up-coming US test focus on merchants selling on eBay.com, which number in the millions.

The PayPal spokesman said a pilot UK scheme was only available to a small number of merchants who were pre-selected.

"The pilot programme has now ended," he added. "We are working on full rollout plans."

Banks and other providers of loans for merchants pulled back after the 2008 financial crisis, leaving an opening for alternative sources of financing. Factoring, a common source of financing in the retail business that is provided by lenders such as CIT Group and Wells Fargo, can be tough to tap for smaller merchants.

The combination of fast-growing online shopping and a lack of credit for smaller businesses has created strong demand for new types of financing among sellers that ply their trade on Amazon.com, eBay.com and other markets.

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