PayPal Goes After Medium-Size Businesses

EBay Inc.’s PayPal plans to buy VeriSign Inc.’s payment gateway business, a move expected to expand PayPal’s merchant services customer base to tens of thousands of new small and medium-size businesses, eBay and VeriSign announced Monday.

The PayPal and VeriSign services are complementary and the deal will give each company’s respective customers more online payment options from a single provider, the companies said in a statement.

PayPal will fork over about US$370 million for VeriSign’s payment gateway business. The transaction is expected to close before the end of the year and is subject to various approvals, including regulatory ones, the companies said.

VeriSign processed more than $40 billion in 2004 through its payment gateway, which lets merchants authorize, process and manage online payments.

EBay also has agreed to purchase security services and technology from VeriSign. Specifically, VeriSign will deploy for eBay and PayPal a two-factor authentication security system designed to prevent identity theft by giving customers a one-time password or digital certificate. With two-factor authentication, users need to satisfy two types of authorizations to obtain permission to log on to a system.

EBay and PayPal plan to begin offering two-factor authentication to customers next year.

By Jim Dalrymple, Macworld.com