E-Commerce service provider eBay Inc.’s (EBAY) shares tumbled 2.8% to settle at $52.73 after technology giant, Apple (AAPL), unveiled a new payment service ‘Apple Pay’ at a conference in Cupertino.
Apple Pay is a mobile payment system which is compatible with iPhones. The company has collaborated with major payment networks, banks and retailers such as American Express, Visa and MasterCard to facilitate the use of its new mobile payment service on its iPhone 6. Additionally, Apple Pay will work with services including Uber Technologies Inc., OpenTable and Groupon Inc.
Historically, Apple’s new products and digital gadgets have electrified the world and captivated both technology geeks as well as average consumers. Given its reputation for flawless execution, investors expect it to do better where others may have failed or been less successful. This is a matter of concern for eBay investors as they see Apple Pay as a direct competitor to PayPal, which lead to the share price drop.
In fact, Apple Pay announcement has not only dealt a blow to eBay, but other payment system companies as well. While Alliance Data Systems dropped 4.2% to close at $245.64, Amazon (AMZN) fell 3.7% and eventually closed at $329.75. Even Google (GOOGL), who has been trying to get into the mobile payment market and is also a direct competitor of Apple, plunged 1.6% to $591.97.
Also, share prices of other competing companies like Fossil Group, Garmin, Movado Group, and GT Advanced Technologies took a hit after the iPhone 6 and Apple Watch announcements.
Though the competition is intensifying in the mobile payment space, PayPal is taking all the necessary measures to enhance its mobile payment business. The company recently announced that PayPal will start accepting Bitcoin payments in the coming months. This could be a big move by PayPal as Bitcoin enjoys wide acceptance and enormous popularity.
With more users resorting to PayPal for various transactions, growth prospects here appears bright. As PayPal’s Bitcoin payment system takes off, it is expected to give it a competitive advantage over other companies, like Square, that have established their presence in this space.
Currently, eBay’s shares carry a Zacks Rank #3 (Hold).
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