PayPal Holdings Inc (PYPL) Has Made Some Smart Acquisitions Over The Years; They Are Ready To Yield Results


After the spin-off from eBay Inc (NASDAQ:EBAY), PayPal Holdings Inc (NASDAQ:PYPL) has become more attractive for investors to invest in it. Some of the investors were waiting on the sidelines for a spin-off to happen to enter the counter. The optimism about the online payment processor is due to several reasons. After becoming independent, the company is now free to engage in focusing what it feels is necessary. That includes M&A and striking a deal with online auctioneer rivals. The separation provided it leverage for its strengths. The company has also acquired four companies that are ready to provide yields.

Mobile Payment

Though online payment from the desktop has been available for a long time, it is the advent of the smartphone that brought the payment processor business to the forefront. Though there are a number of players joining the stream of mobile payment processing through different apps, PayPal Holdings Inc (NASDAQ:PYPL) enjoys the first entrant advantage. As a result, it already has 160 million users. The four acquisitions that it made will further boost its presence in the payment process industry. Clearly, the company not only wants to retain its leadership position but also extend the gap from the nearest rivals.

There were some doubts about its capability to face the onslaught from Apple Inc. (NASDAQ:AAPL)’s Apple Pay, especially after its resounding success. However, the leader is not taking anything lightly and fully geared itself to face any threat. Let’s see how the four acquisitions will help PayPal Holdings Inc (NASDAQ:PYPL) in dominating the online payment process system.

Acquisition Of Xoom

The most recent acquisition was Xoom Corp (NASDAQ:XOOM) for approximately $890 million. The company is engaged in global remittances allowing customers in the Americas to send money, as well as pay bills. It was secure, cost-effective, and fast from mobile, as well as tablets. This could be a new area of focus as far as the company is concerned since it will enter into the $600 billion global money transfer market. The acquisition will allow it to compete directly with The Western Union Company (NYSE:WU) rather start from scratch. The stage appears to be set to disrupt in the remittance market.

The acquisition allowed the online payment processor to broaden its base to 68 million active customers in the United States by cross-selling Xoom’s services. In effect, PayPal could take Xoom’s services to a number of new markets that will give a big headache to The Western Union Company (NYSE:WU).

Paydiant Acquisition

The company was purchased in March last. The company is a cloud-based mobile wallet platform. Paydiant offers licenses to businesses that can establish their own mobile wallet apps. MCX, which was established by a group of big retailers, is one of its big clients. The retailers, both within the group, as well as outside, could provide the same services like Apple Inc. (NASDAQ:AAPL)’s Apple Pay or any third-party mobile platforms. The advantage for PayPal Holdings Inc (NASDAQ:PYPL) is that it will gain direct access to the big volume of purchases from the big retailers, such as Best Buy Co Inc (NYSE:BBY), Target Corporation (NYSE:TGT), and Wal-Mart Stores, Inc. (NYSE:WMT). The online payment processor could gain from the millions of day-to-day transactions happening in these big retail companies.

Braintree

Another acquisition of PayPal was Braintree. The idea of this unit is to support the enterprises established online payment systems. It has an easy process of transactions with a single touch purchase. The acquisition would help to convince brick-and-mortar and online vendors of the most effective way of getting a simple payment platform. It would help Braintree to reach more customers and that will help the parent company the most in the long-run. PayPal Holdings Inc (NASDAQ:PYPL) could use its brand name and the advantage of Braintree’s offerings for the benefit of additional customers.

Venmo

The company is an authorized delegate of the online payment processor and a licensed money transmitter. The advantage of the app is that it enables users to affect money transfer person-to-person through mobile. At the same time, the app also enables users to make payments with a debit card or bank account. Aside from these, the user could see the balance in Venmo.

The app is extensively popular and could be compared with the likes of Google Inc (NASDAQ:GOOGL)’s Google Wallet or Square Cash or Apple Inc. (NASDAQ:AAPL)’s Apple Pay. The objective of PayPal Holdings Inc (NASDAQ:PYPL) is to add Venmo into its merchant marketplace during the earlier period of the next year. For ready reference, Venmo witnessed 200% growth in payment transactions in the first quarter that reached $1.6 billion in value. It will provide all the normal types of online payment from the comforts of the mobile app. Apart from that, it provides peer-to-peer transfer of money, which Facebook Inc (NASDAQ:FB)’s Messenger and Twitter Inc (NYSE:TWTR)’s app provide. Any weakness from P2P is also addressed with the acquisition.

Conclusion

PayPal Holdings Inc (NASDAQ:PYPL)’s acquisition of the four companies from a different segment fill the gap that it might have had before. The idea appears to be very clear. The company should be a one-stop shop for all payment processing systems. It does not matter whether online or money transfer. All the four units have the necessary technology, as well as mobile tools. With these tools and acquisitions, the sales force of PayPal is fully equipped to take it to greater heights. It is just the question of execution that will allow the company to remain the leader in the payment processing system for many years.

Disclaimer: The opinions and data expressed herein by the author are not an investment recommendation and are not meant to be relied upon in investment decisions. The author is not acting in an investment advisory capacity, nor is this an investment research report. The author’s opinions expressed herein address only select aspects of potential investment in securities of the company or companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies’ SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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