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PayPal Acquires Paydiant As It Gears Up For Battle With Apple Pay, Google Wallet

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PayPal is making a second attempt at mobile payments for brick-and-mortar stores by acquiring Paydiant, a digital payments startup that licenses a platform to allow retailers to create their own customized mobile payments solution.

Dan Schulman, president and CEO designee of PayPal, announced the acquisition in a blog post. Schulman says PayPal hopes to strengthen its relationships with merchants by providing them with technology to develop their own mobile payments solution that adheres to their business model and brand, even as Apple Pay becomes increasingly more popular and major technology players Google and Samsung attempt to take their slice of the mobile payments pie.

"Using Paydiant's platform, our merchant partners can now create their own branded wallets to accelerate mobile-in-store payments and drive consumer engagement through mobile payments, loyalty, offers and the prioritization of preferred payment types, such as store-branded credit cards and gift cards," Schulman says.

Paydiant's platform takes on what Schulman calls a "technology agnostic" approach to allow businesses to use whatever method they prefer. For instance, using Paydiant, one retailer can develop an NFC-enabled mobile payments system similar to Apple Pay and Google Wallet. Using the same platform, another merchant can develop another system based on magnetic fields, similar to what the LoopPay payment system acquired by Samsung does.

Paydiant may not be a well-known firm for consumers, but it is actually responsible for providing the platform for CurrentC, an upcoming mobile payments solution being developed by the Merchant Customer Exchange, a consortium of big-box retailers that include Walmart, Target, Sears, Exxon, and CVS. Paydiant is also behind the mobile payments systems of retailers and banks such as Subway, Capital One, and Harris Teeter.

Apple Pay currently accounts for 1 percent of the entire digital payments industry, which is quite significant considering Apple only launched it last year. Given the growing popularity of Apple Pay, it might seem counterintuitive for retailers to develop their own solutions to compete with Apple's system, but many merchants do not want to be at the mercy of Apple, Google, or Samsung when it comes to what payment methods they can accept.

Starbucks, for instance, has its own mobile payments and rewards app used by more than 12 million customers, and it shows no sign of accepting in-store Apple Pay payments even though it was announced as an Apple Pay partner from the beginning. Earlier this year, Starbucks CEO Howard Schultz said the coffee chain was in talks with other retailers who are interested in developing their own payments app similar to what Starbucks has. This is what PayPal is banking on, as it believes that retailers will choose to offer their own branded payments system they can control rather than being controlled by other companies.

"We feel pretty confident that merchants and major retailers are going to want to control their own destiny in terms of what they accept," says Bill Ready, head of PayPal's merchant division.

PayPal did not specify how much it will be paying to acquire Paydiant, but Re/code cites multiple sources who claim that eBay's digital payments arm, which will spin off later this year, is spending $280 million for the acquisition.

Photo: François Tancré | Flickr

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