Consolidation Is Coming To The Mobile Payments Industry

In Sept. 2013, PayPal announced an agreement to acquire Braintree — a specialist in powering mobile-based commerce transactions — for about $US800 million.

In the short term, the deal gives PayPal a pretty significant boost in mobile transaction volume.

But the strategy behind this acquisition goes far beyond an instant lift in mobile transaction volume.

In a recent report from BI Intelligence, we find that for PayPal, the acquisition is about Braintree’s network of clients — including Airbnb, Uber, and Fab — and its mobile transactions platform.

Braintree leans heavily on subsidiary Venmo for its Venmo Touch software, which stores users’ payment information across a network of Braintree clients and creates a one-touch transaction. Braintree acquired Venmo last year.

PayPal’s deal for Braintree will largely kick off a new wave of consolidation in mobile payments. The large credit card companies, which handle massive transaction volume each year and have a wealth of cash on hand, will likely lead the next round of acquisitions.

Visa, American Express, and MasterCard have already played and made investments in this space (e.g., Visa has invested in Square), but they may look to bolster their commitments to mobile.

Other legacy players will also seek to forge or strengthen partnerships with PayPal, Square, Stripe, or Dwolla.

In the report, BI Intelligence puts numbers to the trends and explains why mobile transaction volume is growing so explosively. A significant portion of card-powered e-commerce transactions take place on tablet or smartphone devices. Tablets and smartphones are also powering card-based transactions at physical stores through apps, scannable QR codes, and attachable card readers that transform devices into cash registers.

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The report answers the main questions surrounding this rapidly growing industry:

The report is full of charts and data that can be easily downloaded and put to use.

In full, the report:

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Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.

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