1) Platform: BML has built and deployed a real-time underwriting decision platform. (mentioned above by tvlampsn) This is unique. It allows “transactional credit underwriting” as opposed to account-based underwriting. PayPal does not yet have this. Amazon doesn’t have this. It’s not an easy thing to do. This is a critical component of a successful, disruptive credit offering ON and OFF eBay.

1. Presence: BML has sold this service very well, capturing a large number of top 200 online merchants representing a large portion of potential payment volume. (mentioned above by the author)

2. Placement: The article mentions that, other than Amazon, there is a large overlap of those merchants that accept PayPal and those that accept BML. This is true. But if you look at most of these accounts, BML almost always has better, higher or more upfront, placement on those sites than PayPal does. For example, BML logos are often represented at the top of the homepage. PayPal almost never has placement that well placed. This makes sense because merchants want shoppers to know that they can shop without worrying about how they’ll immediately pay their purchase. This placement drives awareness and ultimately transaction and payment volume share.

3. A Perfect Name. I believe that many online shoppers, when checking out, select the BillMeLater option, not because they know and understand the credit company BML, but because they think that it’s an invoicing option offered by the merchant. To them, it’s not a payment company or a new credit card account, but rather an INSTRUCTION they’re giving to the merchant. “Please bill me later for this purchase.” For Top 200 merchants, this allows the shopper’s trust in the merchant brand to carry the relatively unknown BML. I don’t think BML would have been nearly as successful as a start-up payment company if they’d been named, say QuickCredit or EasyCredit.

I think the deal makes sense. But only time will tell if the price is right. The $1.5 billion that eBay paid for PayPal was considered high at the time that deal was done in 2002. But few would argue that the eBay/PayPal deal hasn’t been one of the smartest acquisitions of the last decade.

This is what eBay is buying that Amazon can’t build. Unless they license the technology from eBay/BML in which case it would be easier for them to use the original.

If anything, Amazon is the company to try to pull this off. They’ve moved away from being a retailer and are evolving into a platform.

In my guestimation

(1) I think BillMeLater is one of the biggest adoptions of a new form of payment since Discover and Amazon would be hard-pressed to recreate the level of consumer adoption.

(2) eBay is smart is doing this deal to take on a new form of payments. Quite frankly, GooglePay could have bought BMLater and shed it’s one-hit-wonder status. What I mean is that GPay could have left the Internet and gone real world with Google waiving merchant fees and making it less costly for real world and online merchants to process payments.

(3) CONFESSION: I learned about this deal over lunch with a VC. It is bad when a dude who reads coverage is telling you about a deal squarely in your industry. yeah, I have been in credit/payments industry since 1989

(4) BMLater could have been a bank (industrial loan corporation). I predict that with the consolidation of credit card firms and the contraction of consumer credit choices, major retailers (Walmart, Target, Amazon, GE) will be allowed to explore ILCs. These Industrial loan corporations were frowned upon two years ago but I am guessing will be reopened and reexplored now

(5) A hidden point of trivia is that BMLater decreases abandoned shopping carts. Merchants save money on processing and make money selling more stuff. Google so missed the boat. Congrats to eBay.

(6) Opportunity Knocked. If I were a VC not to avoid, http://gigaom.com/2008/01/08/9-vcs-youre-gonna-want-to-avoid/ I would chip in money on BMLater2.0 and get a figure head “mobster” from PayPal to start it.

If you hear of something like this email or text me chiang9@duck9.com or 650-283-8008

the real question: if this was such an opportunity, why wasn’t the paypal unit building this kind of offering two years ago?

It took ~$1 Billion to buy out BML – that is ridiculous. Amazon will invest about 1% or less in creating a new payment method in line with BML. Sure it will end up being a proprietary system catering only to Amazon’s needs, but the feature will exist. The “bleeding” of Amazon is not justified here if eBay is going to bleed more – and that is the bottom-line here.

Has anyone added up the price of all of Ebay’s acquisitions? Skype (4.2b), Paypal (1.5b), Rent.com (.4b), Shopping.com (.6b), Verisign Payments (.5b), Bml (.9b), Danish classified ads (.4b), Butterfield (.3b), Stubhub (.3b), Half (.3b), Fraud Sciences (.2b), various international auction sites (?).

Jason Kiesel Founder & CEO http://www.freedomspeaks.com