Share

PayPal Acquires Paydiant In Advance Of eBay Spin-Off

Competition in the mobile wallet space is heating up as Apple and Google show their respective appeal to physical retailers.

PayPal’s acquisition of mobile wallet tech company Paydiant is the digital payments platform’s biggest step toward moving beyond its e-commerce origins as it seeks to prove its value to brick-and-mortar retailers.

Merchants can set rewards through Paydiant.
Merchants can set rewards through Paydiant.

Terms of the deal weren’t disclosed in PayPal’s release, but Fortune’s Dan Primack reports that the sale price was around $300 million. The acquisition is expected to close in the next month or two.

The Rise of On-Demand

PayPal had long attempted to coax physical merchants to use its platform instead of credit cards. But most consumers simply did not view using their plastic credit card to buy clothes or pay a restaurant bill as a problem that needed solving.

Yet the emergence of what GPShopper CEO Alex Muller calls the on-demand revolution, along with this past fall’s release of Apple Pay on iPhones and iPads and Google’s own mobile wallet expansions, has made consumers more comfortable with the idea of using their smartphones in place of cards or cash.

By buying Boston-based Paydiant, PayPal’s existing brick-and-mortar partners can now create their own branded wallets to capitalize on consumers’ increasing acceptance of mobile in-store payments. Like most mobile wallet payment providers, Paydiant’s platform allows for merchant users to set up loyalty programs, offers, and the prioritization of preferred payment types, such as store branded credit cards and gift cards.

Similar to PayPal, Paydiant’s technology takes an “agnostic approach” to transaction systems, meaning that merchants can use any mobile payment technology — such as QR codes or NFC.

The Expanding Mobile Wallet

Aside from a big payday for Paydiant, which has raised $35 million in venture capital since opening its doors four years ago, the company will be able to access PayPal’s enormous scale. The 17-year-old PayPal has 48 million active accounts in 26 currencies and across 203 markets. It processes more than 9 million payments every day.

Last fall, when Apple rolled out its mobile wallet, Apple Pay, the calls from investors for eBay and PayPal to separate grew louder. The auction site had bought the digital payments system for about $1.5 billion in 2002.

“It doesn’t make sense that a global payment system is a subsidiary of an auction website… It’s as if Target owned Visa,” Elon Musk, PayPal’s co-founder told Forbes at the time. PayPal “will get cut to pieces by Amazon payments or by other systems like Apple and by start-ups if it continues to be part of eBay… It will either wither or be spun out.”

The spin-off of PayPal is expected to come later this year.

The Mobile-First Era

Paydiant is bringing more brick-and-mortar clients to PayPal.
Paydiant is bringing more brick-and-mortar clients to PayPal.

PayPal execs are quick to note that they don’t perceive their brick-and-mortar moves as an attempt to battle Apple and Google. But they do see the same opportunity that electronics manufacturer Samsung saw when it acquired another Boston-based mobile wallet provider, LoopPay, last month.

A February survey of 17,500 consumers in 22 countries conducted by PayPal and market researcher Ipsos noted that mobile commerce is growing at nearly three times the rate of overall e-commerce. From 2013-2016, the multi-country average compound annual growth rate for m-commerce is projected at 42 percent vs. 13 percent for all digital commerce combined.

Separately, other studies show the significant influence of mobility on in-store shopping. Roughly 90 percent of retail purchases still take place in-store, but a recent Deloitte study found that smartphones have played a role in 19 percent of sales at physical stores — up from just five percent in 2012.

“We are on the cusp of the mobile-first era,” said Anuj Nayar, senior director of global initiatives for PayPal, in a statement. “At PayPal we’ve seen our mobile growth rise from less than one percent of our payment volume in 2010 to more than 20 percent in 2014.”

About The Author
David Kaplan David Kaplan @davidakaplan

A New York City-based journalist for over 20 years, David Kaplan is managing editor of GeoMarketing.com. A former editor and reporter at AdExchanger, paidContent, Adweek and MediaPost.