eBay CEO: PayPal Will Surpass eBay

eBay's CEO says that PayPal will become the 'digital wallet.'
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NEW YORK (

TheStreet

) --

eBay's

(EBAY) - Get Report

future rests in the hands of PayPal.

As its marketplace business continues its turnaround effort, PayPal is making strides to surpass the core brand, which could happen in the near future.

"Money is going digital," eBay CEO John Donahoe told

TheStreet

in a phone interview as he headed into day two of the Innovate 2010 developers conference being held in San Francisco. "Think about how the iPhone changed the way you use mobile. The cell phone will now become your digital wallet."

In the third quarter, eBay's payments unit, which includes PayPal, reported a 22% surge in revenue to $838 million, compared with a 3% uptick in the marketplaces segment to $1.41 billion.

Currently PayPal makes up 37% of revenue, and Donahoe says "it will be even bigger than eBay, because PayPal's target market is all of e-commerce."

Donahoe said PayPal will process more than $80 billion in transactions this year.

During the developer conference, PayPal announced the release of its Mobile Express Checkout, a platform that will allow customers to pay for retail products in stores using only their mobile phones.

Starbucks

(SBUX) - Get Report

will be the first retailer to adopt the platform.

PayPal also announced a partnership with

Facebook

to allow users to pay for their online gaming credits for popular games like FarmVille.

But as eBay wows investors with its advancements in its payments business, Donahoe also assures the marketplace business is on the right track.

He notes the growing presence of fashion brands opening outlet stores on eBay, as well as flash sales. "We are using our retooled fashion shopping experience as a precursor to other categories like electronics and motors. The offline outlet malls are going online."

As Donahoe said this, eBay simultaneously announced that designer Derek Lam will produce an original collection for the site.

Still, Donahoe's primary focus was on emphasizing the excitement with mobile shopping, especially for the holiday season.

eBay's mobile application has been downloaded 13 million times and will do between $1.5 billion and $2 billion in volume.

--Written by Jeanine Poggi in New York.

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