Will PayPal Deal Drive Braintree Customers Away?

Sept. 30, 2013

After persistently denying for weeks the Chicago-based company was for sale, Braintree Payments and PayPal announced late last week that the eBay unit had acquired the mobile and e-commerce payments provider for $800 million. Braintree’s flagship technology enables consumers to make one-touch payments on mobile devices without having to re-enter payment information. From PayPal’s perspective, acquiring Braintree nets them a technology they can use to simplify mobile transactions, enabling businesses to create for the mobile device rather than adapting an online experience, according to David Marcus, president of PayPal.

“I admire Braintree because they were one of the very first companies to understand the power of real mobile-first experiences,” said Marcus in a post on PayPal’s corporate blog. “I’m not talking about traditional e-commerce ported to your mobile device. I’m talking about groundbreaking experiences offered by companies like Airbnb, OpenTable, Uber, and TaskRabbit. Light, powerful, massively disruptive, and thoroughly delightful, they are all powered by Braintree.”

Payments industry opinions about how robust Braintree’s solution is, however, have varied. And, even some who are generally positive toward the technology feel the match with PayPal might not be ideal. One industry veteran who spoke to CardNotPresent.com predicted that Braintree merchants, which typically are far more technically savvy than most, will flee Braintree “due to the widespread disgust the developer/Webmaster community has toward PayPal.”

Most analysts, however, are giving the acquisition high marks. While some may think Braintree’s platform looks simple from the outside looking in, nothing could be further from the truth, according to Todd Ablowitz, president of Colorado-based payments consultancy Double Diamond Group.

“From a technology standpoint they are way ahead of the curve,” Ablowitz said. “From a business model standpoint, they had the PSP model some time ago and the understanding that they should give a seamless and holistic offering to their partners and customers. Those are the elements that have mattered in the last couple of years in payments, and I suspect those are the things that will continue to matter.”

Any doubt about Braintree’s platform should be allayed by the roster of major mobile players already aligned with the company and the premium PayPal paid to acquire it, he noted. As for the contention that developers will abandon Braintree because it is now part of PayPal, Ablowitz said that rests entirely on how PayPal manages the acquisition and integration of the two companies. Overall, he feels the acquisition benefits both parties.

“PayPal was struggling to get some of these things done in a clean and effective way,” he said. “So having this nexus of capabilities is solid for PayPal. The deal also prevents someone else from having them.”