Shares of eBay have hit an all-time high after it unveiled a plan to take more control of customer payments from long-standing partner PayPal.
It is a move analysts said would help it compete better with Amazon.
Dutch fintech company Adyen will become eBay's primary payments processor under the plan, which seeks to have more transactions conducted directly on eBay's sites.
Analysts said that might bring in more revenue for eBay while lowering costs, adding to optimism from a strong holiday quarter for the e-commerce company.
"Moving away from PayPal, lowering the costs of selling products on the marketplace makes eBay a more significant competitor because it lowers the relative cost versus others including Amazon," said D.A. Davidson & Co's analyst Tom Forte.
EBay is adapting to the likes of online crafts retailer Etsy Inc's model by taking control of the payment process on its marketplaces from PayPal, Forte added.
"But to be clear, there will always be a place for PayPal on eBay -- it just will be less prominent," said Forte.
Some analysts said they were surprised by eBay's estimate of the benefits from taking payments intermediary service in-house. The company said it would add $US500 million ($A700 million) to operating profit after the PayPal deal expires in mid-2020.
Transactions through eBay account for roughly 13 per cent of total payments processed by PayPal, whose shares sank more than eight per cent in response on Thursday.
PayPal might be able to fill the hole created by eBay thanks to its strong growth rate, although that is not certain at this point, BTIG analyst Mark Palmer said.
EBay's backing for Adyen could turn the smaller payment processor into a "much more robust competitor" to PayPal over time, Palmer added.
Other analysts, however, said PayPal, which has been eBay's preferred provider for the past 15 years and will remain a payment page option on the platform for the foreseeable future, had the scale to ride out the blow.
EBay's stock climbed 15 per cent on Thursday, recording its biggest one-day gain since 1998, the year of its market debut.
