PayPal will gain access to Paydiant's mobile payments platform, a white-label service started in 2010 and used by retail brands such as Subway, Sears and Capital One to include mobile payment, offers and loyalty points in smartphone apps.
Dan Schulman, PayPal's president, made the announcement on the company's Forward website, saying that the acquisition will make PayPal a stronger business partner for merchants and help Paydiant grow its business.
"Together, I believe PayPal and Paydiant will enable merchants to create beautiful mobile experiences that make it easier and safer for their customers to shop and pay," he said.
Miya Knights, senior research analyst at IDC, told V3 that the acquisition stands to benefit both companies and will increase competition in the mobile payments sector, an area being pursued by Apple, Google and Samsung among others.
"I would say that the deal is good for competition in this space," she said. "With some good retail clients, such as Subway and Wal-Mart, Paydiant and PayPal will most likely boost their competitiveness with the investment and consumer volumes the acquisition offers."
Paydiant's service is platform neutral, and works with apps on Android and Apple smartphones.
A technology agnostic approach also allows smartphone payments to be made in different ways, such as near field communication or QR codes, on Paydiant's platform.
This will improve the scope and reach of PayPal's smartphone payments, as the service will not be limited to one mobile operating system, smartphone brand or payment technique.
Paydiant is also an established, if not widely known, brand in the physical retail world and will give PayPal a reputable foundation to build on in the bricks-and-mortar side of commerce.
Andrei Charniauski, head of Europe for IDC's financial insights division, told V3 PayPal needs Paydiant to succeed in the physical retail space.
"While PayPal dominates e-commerce payments, it has been trying to get footprint on the high street for a few years now, but with not much progress," he said.
"PayPal has underestimated the amount of time and effort it takes to sign up individual retailers to start accepting it. So, PayPal has a great customer base, but very few brick-and-mortar stores that accept it.
"PayPal needs acceptance quickly - and this is what it gets from Paydiant, whose platform is used by many retailers. This will allow PayPal to offer its wallet as one of the payment options to all existing clients of Paydiant and make necessary software changes quickly and centrally."
PayPal did not reveal any details about the deal, but Re/code reports multiple sources as saying that the company paid $280m for Paydiant. The acquisition is expected to close in late March or April.
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