PayPal strengthens mobile plans with Paydiant acquisition

One of PayPal’s biggest issues over the past few years is its inability to gain a strong foothold inside retailers’ physical storefronts. But its March 2, 2015 announcement of its acquisition of mobile-wallet technology provider Paydiant helps the company address two problems at once as the mobile payments market continues to undergo a remarkable transformation.

“PayPal has done payments really well, but they’ve had issues on both the mobile and offline side of things,” James Wester, research director of global payments for IDC Financial Insights, told Mobile Payments Today in an interview. “This shores up both areas in one acquisition. It gives PayPal a credible way of saying they have a different path to mobile payments [compared with Apple and Google].”

That path begins with Paydiant’s white-label technology, which provides retailers with a mobile wallet and other value-added services such as loyalty. The company counts Capital One, Harris Tweeter supermarkets, Orange Leaf, and Subway as its biggest partners. And Paydiant is the mobile-wallet technology provider behind the Merchant Customer Exchange’s CurrentC app. Going forward, it will be business as usual for Paydiant and its current partners.

“There are no changes on that front,” Paydiant Co-founder Chris Gardner told Mobile Payments Today in an interview. “We started having conversations with our customers [recently] to give them a heads up [about PayPal] and the reaction has been overwhelming positive.

“It’s pretty hard to imagine we would get a negative reaction when we told them we’re adding the might of PayPal while those merchants still get to use our white-label platform.”

PayPal did not disclose the terms of the agreement, but re/code reported the purchase price at $280 million. Paydiant will stay at its current Newton, Mass. location for now, but PayPal has a rather large presence in downtown Boston, despite its West Coast roots.

In keeping with the mobile payments theme, PayPal also announced it is adding contactless acceptance to its PayPal Here mobile card reader.

The connection

Paydiant’s relationship with PayPal goes back almost a year as it integrated the company’s payments platform about six months ago.

“Our approach has always been to support the payment mechanisms retailers want to use,” Gardner said.

That mantra is at the center of this particular marriage.

Paydiant uses a technology-agnostic approach and tailors a merchant’s mobile wallet to work with whatever a business thinks is best: Bluetooth, NFC, QR codes or even a combination of methods. The end goal, Gardner said, is to help the merchant sell more goods regardless of the technology used to complete the transaction.

“People like to say it’s NFC versus QR codes, but I think the reality is we’re collectively solving a business problem here and the goal is to create great experiences for consumers, particularly how it pertains to retailers,” Gardner said.

Paydiant’s line of thinking jibes with the one-size-fits-all approach PayPal pursues with merchants. PayPal now can offer retailers payment acceptance options, business loans, and way to break into mobile payments.

“We want to be a real partner to retailers because that is a key differentiator that we have on a global scale,” Chris Morse, PayPal’s director of communications, said in an interview. “It’s us being much more aligned with the retailers’ and this relationship helps us extend that.”

Current market

How this relationship eventually benefits MCX remains to be seen, but Wester believes the merchant consortium now has more credibility.

“Outside of the payments industry, are people going to recognize that PayPal now is a partner with a company that is partnered with MCX to make the CurrentC app?,” Wester said. “That may be a long chain that PayPal will have to reinforce with consumers, but I think there is a credibility issue of having PayPal involved. It’s a recognized payments option for consumers in the online space.”

MCX might need to lean heavily on PayPal’s recognition if and when CurrentC launches because it sits squarely behind the eight ball now thanks to recent developments in the last few weeks.

“MCX needs to get out there now,” Wester said.

When it does, CurrentC will face competing systems as the mobile wallet market now has a more defined landscape.

“I think at one point, we thought we would have one wallet to rule them all and everyone else would be picking up what’s left,” Wester said. “Now what we’re seeing are wallets with similar user experiences and that benefits them all.

“We now have all of the sensible, viable mobile payment platforms out there and now it’s going to be up to the consumer to decide what they want to pay with.”

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