NEW YORK | EBay's PayPal is near a deal to buy Braintree Payments Solutions, according to people familiar with the discussions, potentially thrusting the online payments pioneer into the center of the burgeoning mobile commerce market.
The deal for Braintree would give PayPal access to data and lucrative transaction fees from Braintree’s expanding network, which currently processes more than $10 billion annually for companies like OpenTable, Uber Technologies and Airbnb. Braintree charges merchants a 2.9% commission and 30-cent transaction fee.
An eBay spokesman and Braintree CEO Bill Ready both declined to comment on Sunday. Terms of the deal couldn’t immediately be learned, and the people familiar with the discussions cautioned that talks could break down.
PayPal looking for expansion
PayPal has pushed to expand beyond its original mission of processing payments for goods sold on eBay and other websites. A deal for Braintree, a Chicago-based startup, could accelerate PayPal’s crucial goal to draw more revenue from smartphone and tablet users.
Mobile payments — the ability to pay for goods using just a phone — have long been viewed as something of a holy grail for technology firms. Smartphones provide data on shopping habits, as well as opportunities to send targeted discounts and direct consumers to merchants through maps and mobile advertising.
Research firm Gartner expects the mobile-payments market to grow by 31% this year to $235.4 billion — and to increase by more than three-fold by 2017. Investors, too, are betting big on mobile payments: In the past year, venture capital firms and others have pumped nearly $800 million into the industry, an 11% jump from a year earlier, according to CB Insights.
More Competition for PayPal
PayPal has been besieged by a raft of startups competing for a slice of the mobile payments pie. In particular, PayPal faces pressure from firms developing so-called digital wallets — like Google, Square and Lemon — that aim to replace physical wallets and credit cards.
Perhaps of particular appeal to PayPal is Braintree’s Venmo division, which allows for consumers to pay each other for free through an app. Braintree acquired Venmo last year for $26.2 million.
Braintree, founded in 2007, has drawn about $70 million in funding in the past two years, including from Accel Partners, New Enterprise Associates and others. Braintree has expanded rapidly since its founding in 2007. The company counts some 4,000 merchants using its payments service, at least a third more than just a year ago.
Article sourced from WSJ, September 22nd, 2013