PayPal to acquire Paydiant to withstand competition from rivals

By | March 3, 2015

Shortly after the launch of Apple Pay, various retailers including Walmart, Rite Aid and CVS, blocked Apple’s tap-to-pay technology from their stores. Instead, these retailers banded together to place bets on an in-house mobile payment system called CurrentC. That network was developed in partnership with Boston-based mobile wallet technology startup Paydiant. On Monday, PayPal signed a deal to acquire Paydiant, a digital payment company known for creating private label payment services for retailers.

PayPal acquires Paydiant

With this news yesterday from Mobile World Congress, PayPal has officially become a thorn in Apple’s side. The deal, for an undisclosed sum, will give PayPal instant access to a group of customers using Paydiant’s technology, known as the Merchant Customer Exchange. That Consortium has been developing an in-store payments app known as CurrentC that is meant to be an answer to Apple’s Apple Pay system.

Paydiant provides the back-end technology behind mobile apps that allow for in-store payments using a scannable code at checkout. Unlike Apple, that technology requires the extra step of turning on a phone, which has slowed adoption. PayPal’s Bill Ready, the head of its merchant business, said the acquisition allows the company to expand payments options for its 155 million active users.

Mobile payment are expected to explode in popularity by next year, growing to $27.5 billion in US transactions from last year’s $3.5 billion, according to market research firm eMarketer. The number of mobile payment users in the US is expected to hit 36.2 million next year, more than twice the number using digital wallets in 2014, the researcher said. That pace is expected to continue into 2018, when eMarketer foresees 57 million consumers using their smartphones to checkout at store registers.

So far, payment systems have been a major theme at the tech show, which is taking place the week before Apple reveals more details about its upcoming smartwatch—an event where payments will undoubtedly play a prominent role. On Sunday, Samsung debuted its new flagship phones, the Galaxy S6 and S6 Edge, at the show, along with a new payments platform called Samsung Pay. Google also rolled out a new developer tool called Android Pay.

Though PayPal is a giant in payments processing, it has relied heavily on strategic acquisitions, such as Braintree and Paydiant, to stay relevant in mobile. The company has had limited success with moving into physical stores, but it’s hoping to change that with Paydiant as well as a new credit card terminal equipped with Near Field Communication that will roll out in the UK and Australia this summer, and in the US later this year.