PayPal to Pay $280 Million for Paydiant, the Startup Behind Walmart’s Apple Pay Competitor

PayPal.
Eric Piermont | AFP | Getty Images

PayPal isn't giving up on payments in brick-and-mortar stores.

The eBay payment unit plans to acquire Paydiant, a payments startup that licenses a technology platform used by big retail chains to create their own branded mobile wallet apps. Multiple sources said PayPal will pay around $280 million for the Wellesley, Mass.-based startup. PayPal declined to comment on the price.

Founded in 2010, Paydiant's white-label platform is used by Subway and other retailers and banks to add payment, loyalty and digital-coupon capabilities to their own apps. Its customer list also includes MCX, a consortium of big-box retailers led by Walmart that says it will launch its own mobile wallet app, CurrentC, later this year.

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For the last few years, PayPal has tried to become a popular payment option in brick-and-mortar stores as it looked for new growth areas outside of Internet payments. Those efforts haven't been a success up to now, as its former retail chief even admitted in a recent interview with Re/code.

But the acquisition of Paydiant, which is expected to close this month or next, positions PayPal as a retailer's ally while Apple, Google and Samsung all vie to own the in-store shopping experience with their own mobile payment systems. Many retailers don't want to be beholden to a dominant payments service, whether it's from Apple or Google. Ultimately, some may decide it benefits them to have other players such as PayPal offering alternatives.

The deal also gives PayPal a path to becoming a payment method in more apps and a new storyline as it readies to spin off from eBay into its own publicly traded company later this year.

In an interview, Bill Ready, head of the merchant division of PayPal, said the company believes some retailers will always choose to offer their own mobile wallets no matter the competition from tech giants.

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Apple launched Apple Pay in the fall; Google recently cut a deal with wireless carriers to get Google Wallet pre-loaded onto potentially millions of smartphones; and Samsung just announced its own system, Samsung Pay.

"I don't think it's an either/or," Ready said. "We feel pretty confident that merchants and major retailers are going to want to control their own destiny in terms of what they accept."

Ready would not comment on what the acquisition means for Paydiant's relationship with MCX, but it seems likely that it will stay intact. MCX found itself on the wrong end of a media maelstrom last year when two of its member retailers — CVS and Rite Aid — shut down support for Apple Pay after originally accepting it. One of the main goals of MCX, whose members also include Target, Best Buy and Kohl's, was to create a mobile app that made it easy for shoppers to use payment methods such as a bank account hookup or store-branded card that are cheaper for retailers to process. Apple Pay, on the other hand, only currently supports traditional debit and credit cards, which cost retailers more money to process.

Paydiant had raised about $35 million from General Catalyst, North Bridge Growth Equity & Venture Partners, and a couple of other firms.

By Jason Del Rey, Re/code.net.

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