E-commerce service provider
) has completed the acquisition of the mobile payment processor
company - Braintree - for $800 million in cash. This deal was
announced earlier in September.
Chicago-based Braintree was founded in 2007 by Bryan Johnson.
It is a payment processing company which helps businesses set up
online payments through merchant accounts, mobile apps, credit
card storage and payment gateways. Additionally, it's mobile app
- Venmo - lets consumers make payments via smartphones and
Braintree's payment platform is used by many online and mobile
startups, including Uber, Airbnb, Rovio, TaskRabbit LivingSocial
and OpenTable. The company charges a fee of 2.9% and an
additional processing fee of 30 cents per transaction. For 2013,
Braintree expects to process about $12 billion in payments, out
of which $4 billion will be in mobile payments.
Braintree will now operate as a separate service within
PayPal. PayPal is one of eBay's fastest-growing businesses,
accounting for almost half of eBay's annual revenues. The new
division will be led by Braintree CEO, Bill Ready, who will
report directly to PayPal President, David Marcus. Management
projects that the acquisition will lower eBay's 2013 pro forma
earnings by 1 cent without affecting its revenues.
This acquisition is an important strategic move to eliminate
eBay's major competitors in the mobile space and enhance
PayPal's mobile payments capabilities through Braintree's Venmo
mobile app. It is likely to put PayPal in a better position
against rival mobile payment systems such as
) digital wallet,
) GoPayment and Starbucks-backed Square Inc.
Today, the biggest growth driver in the industry is the rising
use of smartphones, tablets and other mobile Internet devices.
Consumers, nowadays, prefer the convenience of ordering and
paying online over the hassles of shopping at brick-and-mortar
To benefit from this change, PayPal is taking all the
necessary measures for continued growth in the mobile payment
business. It is pushing beyond its online payments service and
expanding its offline, mobile and online offerings to stores,
restaurants and other businesses.
PayPal has introduced new solutions and acquired companies
including Zong (a Chinese mobile carrier billing payment company
bought in 2011) to enhance the mobile shopping experience for its
customers. In 2013, the company expects to generate $20 billion
of mobile commerce and payments volume.
The Braintree acquisition is yet another move by PayPal to
improve its mobile payment service. In March, the company
acquired a mobile app development company - Duff Research - to
retain PayPal's dominant position in mobile payment systems. Very
recently, eBay unveiled a hands-free payment system - Beacon -
enabling consumers to make retail in-store payments without using
Though eBay's payment business shows great promise,
competition is likely to pick up as banks and other companies
announce their own payment systems and Google'sdigital wallet
Currently, eBay's shares carry a Zacks Rank #3 (Hold).
Investors interested in the same industry may consider a stock
like Geeknet, Inc. (
), holding a Zacks Rank #1 (Strong Buy).
EBAY INC (EBAY): Free Stock Analysis Report
GEEKNET INC (GKNT): Free Stock Analysis
GOOGLE INC-CL A (GOOG): Free Stock Analysis
INTUIT INC (INTU): Free Stock Analysis Report
To read this article on Zacks.com click here.