By Dow Jones Business News, September 26, 2013, 09:25:00 PM EDT
EBay Inc. ( EBAY ) will buy payments service Braintree Payments Solutions LLC for $800 million in cash, making a big bet
to secure the pole position in the race to get consumers to pay for goods and services on smartphones.
The deal will give eBay's PayPal unit more extensive customer data as well as the lucrative transaction fees from
Braintree's expanding network, which currently processes more than $12 billion in payments annually, a third of which is
on mobile devices. Braintree charges 2.9% plus 30 cents per transaction.
Braintree is one of the faster growing payments companies in a crowded field that includes Stripe Inc., Square Inc.,
Google Inc. and others. Just two years, ago it was processing $3 billion annually. Part of its appeal is its client list
that includes tech firms such as transportation company Uber Technologies LLC and lodging reservation service Airbnb
"Braintree has a great position in new economy companies," said eBay Chief Executive John Donohoe in an interview. "
This will allow us to be a part of that."
A Braintree spokesperson didn't immediately return a request for comment.
In recent years, PayPal has pushed to expand beyond its original mission of processing payments for goods sold on eBay
and other websites. The deal for Braintree, based in Chicago, accelerates PayPal's strategic goal of drawing more
revenue from smartphone and tablet users, said Mr. Donahoe. EBay, however, doesn't break down its revenue from mobile
A raft of payment startups are fighting for a piece of the mobile market that is expected grow by 31% this year to $
235.4 billion--and to jump more than threefold by 2017, according to research firm Gartner. At stake is control over the
future of shopping as consumers move more of their lives onto their smartphones. The devices have the potential to carry
rich data on users' shopping habits, in addition to opportunities to send targeted discounts.
The challenge for PayPal and others in mobile payments has been twofold: creating a process that is easier than
swiping credit cards, and one that is adopted by enough vendors to make it worthwhile for the consumers.
Mr. Donohoe also said Braintree's Venmo unit, which it acquired last year for $26.2 million, will broaden PayPal's
core cash payments business. Venmo's app allows users to virtually exchange small amounts of money for free between bank
accounts and using debit cards. It charges 3% for sending money using credit cards. Venmo's recently introduced "Touch"
service stores credit card information across mobile apps.
EBay said PayPal is expected to have mobile-payment volume of more than $20 billion this year.
But PayPal faces intensifying competition in mobile payments, particularly from Google, Square and startup Lemon Inc.,
which are building out so-called digital wallets that store credit and loyalty cards.
More recently, PayPal has been experimenting with a variety of offline payments tactics, including registers at small
businesses, a device for swiping credit cards and a way to automatically pay in stores without even pulling out a
smartphone. It revamped its mobile application to include capabilities like ordering ahead at takeout restaurants and
automatic billing for restaurant checks.
Six-year-old Braintree had raised nearly $70 million from venture-capital firms such as Accel Partners, New Enterprise
Associates and Greycroft Partners.
Since it was acquired in 2002 by San Jose, Calif.-based eBay, PayPal has been a crucial profit center. PayPal, which
counts 132 million users world-wide, is on a pace to overtake eBay's marketplace business in the coming quarters in
Mr. Donohoe said he plans to keep Braintree's workforce of about 200 and the company will operate as a separate
The deal for Braintree is expected to close in the fourth quarter and won't materially affect PayPal's 2013 net total
payment volume, eBay said. The acquisition is expected to have an immaterial impact on eBay's revenue guidance but hurt
its adjusted earnings outlook by a penny to three cents a share for the year.
-Ben Fox Rubin contributed to this article.
Write to Greg Bensinger at email@example.com
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