Blog: The $800MM Braintree Acquisition and PayPal’s Pursuit of the Emerging Digital Marketplace (November 2013)
By Patrick Carroll, First Annapolis Consulting
PayPal has been quite active in the payment space with many solutions already announced or in-market today, including:
- A mobile POS solution known as PayPal Here for small businesses and micro-merchants
- A cardless QR-code payment solution known as Payment Code, catering to the brick-and-mortar retail environment and made possible through a partnership with Discover
- A proximity-based Bluetooth checkout solution known as PayPal Beacon for brick-and-mortar establishments
- A widely used mobile application that supports mobile consumer person-to-person (P2P) and small business payments
In this context, PayPal’s pending acquisition of Braintree will broaden its scope of innovative digital commerce solutions. Braintree is an e-commerce gateway connecting merchants and marketplaces with their customers. The company has emerged as a leading provider of mobile-optimized, flexible and scalable payment services for mobile-reliant companies such as Uber, LivingSocial and Airbnb. A typical Braintree merchant interfaces heavily with customers via their mobile apps and puts significant emphasis on minimizing points of potential friction along the customer’s mobile purchase journey. The addition of Braintree will add a portfolio of merchants that processes $12 billion annually while enhancing PayPal’s ability to service an emerging breed of mobile commerce players.
The acquisition of Braintree also will support PayPal’s effort to overhaul its developer platform. PayPal’s developer platform was designed during the e-commerce era of the late 1990s. Braintree’s platform has been constructed with developers and flexibility as a key focus, setting them apart from most other gateways. The expectation is that the Braintree acquisition effectively will represent an overhaul of PayPal’s developer platform, positioning the company as a prominent player for emerging e-commerce services.
In addition to enhancing its developer platform, Braintree’s Venmo business is an attractive and intriguing asset. Venmo, a P2P payments service, was acquired by Braintree in 2012 for $26 million. Venmo has gained traction and has emerged as a new competitor to PayPal’s P2P payments service, particularly among younger demographics. In recent months, Venmo has expanded its P2P payments functionality to also serve as a consumer digital wallet at participating Braintree merchants. In other words, consumers can make purchases without entering their credit card information by selecting a “Pay with Venmo” option. While Venmo is significantly smaller than PayPal, its integration with Braintree merchants illustrates the reduced friction that many mobile-reliant merchants are seeking in a payment acceptance solution.
The Braintree acquisition, the largest by PayPal during the mobile era, illustrates the company’s intent to expand its suite of online and mobile payments solutions. As the in-store mobile wallet race continues to develop in parallel, an investment in the app- and mobile Web-based commerce space should put the company in a competitive position to grow its total payments volume moving forward.
Patrick Carroll is a senior analyst at First Annapolis Consulting, specializing in mobile/ alternative payments and merchant acquiring. This article originally appeared in First Annapolis’ newsletter Navigator. Patrick can be reached at [email protected].
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