eBay Corralling Users Toward PayPal

Beginning in late October 2008, checks and money orders will no longer be allowed as payment methods on eBay. All items appearing on eBay.com must be paid for using either:

• PayPal (funded by PayPal account balance, credit card, debit card, bank account, PayPal Pay Later, PayPal Buyer Credit or eBay gift certificate)
• Credit or debit card payment to a seller (through a seller's Internet merchant account)
• ProPay
• Payment upon pickup

While eBay may be allowed to do this, it definitely seems like a good way to shoot itself in the foot. If customers don't want to use PayPal, they're simply going to bypass eBay entirely, and use an alternative. That not only cuts eBay out of the transaction, but also the listing fee. eBay tries to position this as being about making the experience better for both buyers and sellers, but that's clearly untrue. Instead, it seems like eBay is afraid to compete on the merits with its payment solution, knowing that many, many users are increasingly fed up with PayPal. Yet, rather than fix PayPal, the company's response is to ban the competition.