On Monday, PayPal announced that it had reached an agreement to acquire Paydiant. While the terms of the acquisition were not disclosed to the public, Fortune is reporting that the deal was in the $300 million range, “$285m of equity, and $15m in founder earnouts.”1 In a nutshell, Paydiant offers white label mobile payment and mobile wallet software to retailers. Here is the company description from CrunchBase:
Paydiant provides a white label mobile wallet platform that includes mobile payments, loyalty, offers, ATM cash access and related commerce services. The patented cloud-based platform enables merchants and banks to deploy their own secure mobile wallet solutions under their own brands, in their own apps.2
This move makes perfect sense for PayPal, as they continue to have a hard time breaking their payment platform into physical, brick-and-mortar stores. In the acquisition, PayPal receives a company that already has a proven record in the mobile payment space:
They’re [Paydiant] the folks that have helped companies like Subway, Harris Teeter, Capital One and many others build mobile payments, offers and loyalty into their own mobile applications. They also provide the mobile wallet platform for MCX whose members include many of the world’s largest retailers including Walmart, Target, Sears, Wendy’s, Exxon, CVS and many others.3
The move, at least at first glance, makes less sense for Paydiant. Right now, with Apple Pay, Samsung Pay, and even Android Pay, the mobile payment space is seeing more consumer and media interest than ever before. It seems that the industry is positioned to absolutely blow up. Fortune was able to speak with Jim Moran, from the VC firm North Bridge that was one of the original investors in Paydiant. Moran offered his take on the acquisition:
The reality is that mobile payments is still a zero billion dollar industry. While we had very big contracts with some very big merchants, the actual dollar values and volumes were just kicking in. And then you have what Apple is doing, which shined a big light on what we were doing but it caused a lot of boards to stutter-step on mobile payments…So we mapped the capital requirements against time and projected volume — which equates the revenue register ringing for us — and we felt the partnership with PayPal made a lot of sense. Particularly since its incoming CEO, Dan Schulman, knew us from his time at American Express and that our platform is industrial strength. He wants this to become a very big division of PayPal, and the [Paydiant] team was all on board… When a team tells you it’s time, it’s not my place to say it isn’t.4
It looks as if this is a win-win. PayPal desperately needed to inject some life into is mobile payments offerings. With the acquisition of Paydiant, they do just that. Paydiant saw the writing on the wall and realized that it would take a huge injection of capital to build up their platform enough to take on the like of Apple and Samsung directly. The deal is expected to be finalized by late March or early April.