PayPal is putting a lot of effort into ensuring that the company that emerges from eBay ownership this month is a much different and more powerful creature than the one it has been until now.
Its recent agreement to buy the money transfer company Xoom for $890 million cash is a significant addition, but it's just one of many PayPal has made over the years as it absorbs new lines of business that stretch farther from its roots as a payment facilitator for online auctions.
"PayPal has made a set of very shrewd moves prior to splitting off," said Richard Crone, chief executive of San Carlos, Calif.-based payments consulting firm Crone Consulting LLC.
The addition of Xoom plunges PayPal, already a global e-commerce payments company, into the global remittance business dominated by the likes of Western Union and MoneyGram but those companies may not be the ones that have the most to fear from a combination of PayPal and Xoom.
Xoom's technology joins that of Paydiant, which provided the underlying technology behind the Merchant Customer Exchange's CurrentC mobile wallet (which is still under development).
Xoom relies on digital channels instead of a network of agents. This business model pairs extremely well with Paydiant's mobile wallet technology.
"Think of the power of Xoom tapping into a mobile system like M-Pesa in Africa," Crone added. "They can start to take big chunks of the cash component out of those developing markets."
These acquisitions can also be combined with the assets of Braintree, which PayPal bought at the end of 2013 to boost its appeal to both developers and the millennial person-to-person payment audience that had already adopted Braintree's Venmo P2P system.
Each of these acquisitions address different markets, but they share a common thread of enabling PayPal to be at the core of any type of payment, said Larry Berlin, vice president with Chicago-based First Analysis Securities.
"All of their acquisitions fit together because PayPal, at heart, just sends money from one person to another," Berlin said. "It might be a business, or a small business, but it's essentially the same, so there is a real synergy there."
PayPal did not respond to inquiries about the latest developments, but when announcing the Xoom deal, PayPal president Dan Schulman made it clear that he expects the Xoom service to give the PayPal brand more exposure.
"Acquiring Xoom allows PayPal to offer a broader range of services to our global customer base, increase customer engagement and enter an important and growing adjacent marketplace," said Schulman, who will be PayPal's CEO when the spinoff is complete. "Xoom's presence in 37 countries in particular, Mexico, India, the Philippines, China and Brazil will help us accelerate our expansion in these important markets."
Because Xoom operates through mobile phones, tablets and computers, it likely will put further pressure on Western Union's money transfer network, which relies heavily on cash distribution stations throughout the world. At least, this is what Western Union's investors seem to fear, as the WU stock price fell nearly 7% upon the news that PayPal was acquiring Xoom.
"I look at this as potentially being competitive to Western Union, but that competition always takes place in the form of what you can offer the consumer and the pricing you can offer," Berlin said.
The nature of PayPal's recent acquisitions also shows a shift in its strategy, starting with the 2013 purchase of Braintree. Until then, many of PayPal's numerous acquisitions were about bringing on fresh talent, such as the 2011 purchase of Zong, a company headed by David Marcus, who was soon picked to become PayPal's president. Other companies PayPal purchased for their talent include Duff Research and Iron Pearl.
It is not likely PayPal would seek a bank charter at this time, an option more readily available to the company now that it is spinning off from eBay, Berlin said. Instead, PayPal could follow the example set by Walmart, which "has shown a pathway to providing every service a bank can provide, without the banking license," Berlin said.