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Reuters/Beck Diefenbach
Free at last.

PayPal is finally free—let the real mobile-payments battle begin

By Dan Frommer

It’s finally happening: eBay is officially spinning PayPal off as a separate company. And it comes at a crucial time, just as the budding mobile-payments industry—which many see as the future of payments and commerce—is getting interesting.

While PayPal has very done well for itself—payment volume grew 29% from a year earlier in the June quarter to $55 billion—things are about to get more competitive.

Apple is about to enter the market with Apple Pay, a simple and well-designed system that lets iPhone owners buy things in person and in apps using their phones. Importantly, Apple Pay props up the existing payments infrastructure—including the major credit card companies that PayPal has been trying to get around.

Google, where ambitions have no limits, failed in its first few attempts to conquer payments, but has proven itself willing to spend many billions of dollars to achieve its goals. As some have suggested, perhaps Google will try to acquire Square or Stripe (a fast-growing payments processor for developers.)

Meanwhile, Facebook recently poached PayPal’s former president to run its fast-growing Messenger business—which could be the basis for its own payments push. Alibaba, the Chinese internet giant that runs Alipay, just went public, and is potentially a buyer for eBay (or, perhaps, even PayPal.)

There are certainly a lot of players and potential combinations chasing this market.

And with the mobile-payments market expected to more than double over the next few years—to more than $700 billion in transactions—PayPal just can’t sit still.

While it has grown tremendously in all aspects under eBay’s ownership, it now seems better off on its own. (That is, if it doesn’t get swallowed up by a Google or a legacy payments giant.)

Many see the PayPal product as one from a bygone era—cumbersome user interface, frustrating limitations, and generally lacking innovation. Under its new president, former American Express executive Dan Schulman—who also previously worked in the mobile industry—the company can let go of its legacy baggage and act like a disruptive startup again. Or at least it can try.