PayPal is nearing a deal to buy Braintree Payment Solutions, which would give the eBay subsidiary access to transaction fees from more than $10 billion in payments Braintree processes annually, according to a report in The Wall Street Journal.
Braintree, whose clients include OpenTable, Uber Technologies and Airbnb, also processes about $2 billion yearly in mobile paymentsa trait that makes it an attractive acquisition target for companies looking to expand quickly into mobile, with Square and Google earlier reported to be potential buyers. Visa and MasterCard may also be suitors, Aite senior analyst Rick Oglesby told PaymentsSource in an earlier interview.
"PayPal would enjoy a robust and recurring revenue stream from transaction fees generated by Braintree's merchants," says Jordan McKee, an analyst at Yankee Group, noting Braintree's revenue from mobile. "This would help further PayPal's push into the mobile space."
The Wall Street Journal did not say how much PayPal would pay for Braintree, though Braintree's asking price has been reported to be about $1 billion, an amount that may keep smaller suitors away. PayPal spokesman Albert Schweitzer did not comment on rumors and speculation, and Braintree did not return requests for comment by deadline.
If an acquisition takes place, PayPal could use Braintree to further improve its own recently redesigned mobile wallet. And the buyer would also have access to Venmo, which enables consumers to use their mobile devices for "one click" payments on electronic commerce sites. Braintree purchased Venmo in 2012 for $26.2 million.
"While PayPal already has a P2P offering, Venmo could help build this platform out further," McKee says.
PayPal has already demonstrated a willingness to buy competitors that have built momentum in a new market. Its 2008 purchase of Bill Me Later, for example, gave PayPal a stronger instant-credit offering than its homegrown Pay Later.
"Although Braintree has some great online clients, for PayPal this would be an acquisition of talent and resources," says Phil Philliou, a payments consultant. "PayPal's technology backbone is becoming dated and Braintree may provide the updates that PayPal needs."