PayPal agreed to acquire Braintree Payments Solutions as the company looks to expand its mobile commerce and sign deals with start-ups such as Uber and Airbnb. PayPal agreed to pay around $800 million in cash for the start-up that was founded in Chicago in 2007.
Braintree has around 4,000 merchants using its services. Its platform helps process payments for several start-ups such as TaskRabbit, Uber, and Airbnb. Braintree is headed by Bill Ready and also owns Venmo. Braintree allows users pay each other for free via a mobile app.
PayPal acquired Braintree to give eBay access to current and future clients of Braintree. The company has been focused on integrating its platform with start-ups and the mobile apps that power much of their business.
Venmo has attracted younger users, which is a demographic that PayPal has been struggling to reach. Braintree has superior APIs that control how various software programs interact with each other. PayPal has been trying to improve its own APIs but it made sense to purchase Braintree and adopt its APIs.
eBay shares increased 3.9 percent to $56.32 in afternoon trading last Thursday. The stock nears its 52 week high of $58.04. Mobile commerce is the fasting growing sector of e-commerce because people have transitioned to using smartphones to shop and pay for services. Retail mobile commerce sales are estimated to increase 68 percent to $41.68 billion in 2013 and over $100 billion by 2017.
PayPal has seen a rapid expansion of its mobile payments business but the company has gained lots of competitors, including Google and Square. eBay CEO John Donahoe said that Braintree is perfect for PayPal because the technology can help accelerate PayPal’s global leadership in mobile payments. Braintree will remain as a separate service within PayPal under CEO Ready. He will report directly to PayPal President David Marcus. Its workers and management team are expected to be retained.
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