EBay announced its plan Thursday to buy Braintree for $800 million to further improve PayPal and encourage more users to make online payments.
This deal will make a big bet to shelter the online reseller’s current position in the race to have consumers transact for services and even goods using their smartphones.
This step-up will give eBay’s PayPal unit a broader customer data and profitable transaction fees from Braintree’s expanding network, which, as of the moment, processes more than $12 billion online payments per year; roughly one third of it is made using mobile devices. An additional 30 cents on top of 2.9 percent is charged by Braintree per transaction.
John Donohoe, eBay’s chief executive, told Wall Street Journal, “Braintree has a great position in new economy companies. This will allow us to be a part of that.”
Braintree is among the fast growing payments companies in the industry. In the past couple of years, it was noted to process $3 billion per year. Some of its major clients include lodging reservation service Airbnb, Inc. and transportation company Uber Technologies LLC.
PayPal, which currently has over 120 million users, has been planning to expand beyond its initial plan of just processing payments for goods sold on eBay and on the Web. Donohoe claimed that this deal with Braintree will speed up Paypal’s plan of drawing more income from tablet and smartphone users.
One of the challenges PayPal has to address yet is to think of a way to create a process that is simpler than swiping credit cards and to make it worthwhile and attracting to consumers.
EBay is working to close the deal by the last quarter of 2013. Meanwhile, Braintree has not released any announcement yet about the said deal. EBay’s share price improved by 4.2 percent after the announcement closing at $56.52 on Thursday.
