EBay Inc.’s agreement to shell out $800 million for Braintree Payments Solutions LLC, announced on Thursday, signals the online auction giant’s desire to extend its PayPal brand further into mobile commerce and in-store commerce, analysts suggest.
EBay’s confirmation of the deal, which is expected to close in the fourth quarter, came after days of speculation about talks between the two companies. The agreement sees Chicago-based Braintree continuing on as its own brand under the PayPal umbrella. Braintree, which counts merchants like Airbnb, Fab, OpenTable, and TaskRabbit among its customers, expects to have $12 billion in payment volume in 2013, of which $4 billion is mobile payments. Braintree offers payment acceptance on mobile and desktop Web sites and via merchant apps. PayPal forecasts $20 billion in 2013 mobile payments volume.
EBay bought Braintree because of its success, writes David Marcus, PayPal president. Marcus was founder and chief executive of Zong, a mobile payments company that eBay bought in 2011. “In a very short time, Braintree has built impressive mobile payment solutions that handle transactions in 130 currencies in more than 40 countries,” Marcus writes in a PayPal blog. “Mobile developers love Braintree’s tools and the great hands-on service that they offer. I admire Braintree because they were one of the very first companies to understand the power of real mobile-first experiences. I’m not talking about traditional e-commerce ported to your mobile device. I’m talking about groundbreaking experiences offered by companies like Airbnb, OpenTable, Uber, and TaskRabbit. Light, powerful, massively disruptive, and thoroughly delightful, they are all powered by Braintree.”
Executives at Braintree were not immediately available.
PayPal likely sees a potential payoff in furthering its mobile-commerce and payments ambitions, says Jordan McKee, an analyst at Boston-based consulting firm Yankee Group. “PayPal undoubtedly sees mobile as the way of the future and acquiring Braintree will help it to execute on that vision,” McKee says. “PayPal continues to make strong inroads into the mobile payments space. Without question, PayPal will be a force to be reckoned with in mobile payments”
Braintree’s mobile-payment service offers a one-click checkout capability, a technology that helps make the company a good fit for PayPal, says Rick Oglesby, analyst at consulting firm Aite Group LLC. “The service is competitive to PayPal’s, and Braintree has close to 40 million accounts on file,” Oglesby says. “The acquisition enables PayPal to gain market share, revenue, technology, enrolled consumers, and talent all in a single acquisition, and the vast majority of it is complementary to or an extension of their existing business.”
Combining PayPal’s consumer focus with Braintree’s merchant focus harbors the potential for creating a better PayPal mobile wallet, says Mary Monahan, executive vice president and research director for mobile at Pleasanton, Calf.-based Javelin Strategy & Research. In a new report, “Mobile Wallet Game Changers,” Javelin found that 34% of consumers are likely or very likely to use PayPal’s mobile wallet. Braintree’s platform, which could be available within the PayPal mobile wallet, is well-suited to fast-growing merchants, she says. “If you can be the consumer choice and become the merchant choice, you’re building a great platform for a mobile wallet,” Monahan says.
PayPal also is getting Venmo, a digital-wallet service Braintree purchased in 2012 that allows consumers to make person-to-person payments via Twitter, Foursquare, and Facebook using credit and debit cards or via bank transfers.