PayPal adds marketplace payments with $400m reach for Hyperwallet

PayPal has shelled out $400m for Hyperwallet to improve its ability to serve the wide variety of marketplace businesses – from Expedia to Uber to Amazon – that have emerged in recent years. Marketplaces are growing rapidly and have more advanced payment needs than the average e-commerce business given their global nature and multiple stakeholders that are part of the transaction. PayPal has existing capabilities in marketplace payments, in part through its $800m acquisition of Braintree in 2013, but lacked a holistic platform and advanced capabilities. The gap it created allowed numerous marketplace payment specialists to emerge and scale, including Stripe, Adyen and YapStone.

Hyperwallet, which was founded in 2000 and has roughly 200 employees, has favorable margins on international payments with strong growth. Most importantly, the target brings PayPal a robust payout platform that can disburse funds in various ways to marketplace participants in upwards of 200 countries. Coupled with PayPal’s 218 million active consumer accounts, this should create the basis for a unique and highly efficient disbursement offering. Hyperwallet should complement PayPal’s Braintree business unit, with Hyperwallet CEO Brent Warrington reporting to Braintree head Juan Benitez when the deal closes, expected in Q4.

At its May investor day, PayPal’s CFO emphasized the importance of inorganic growth for the company’s long-term strategy, laying out plans to tap its strong balance sheet and spend $1-3bn annually on deals over the next few years. PayPal has a favorable position in the market but is facing mounting competitive pressure, especially on the merchant side of its business, which has been hit hardest by some of the above-mentioned entrants. In recent years, PayPal’s merchant capabilities have begun to lag market leaders, creating obvious gaps in its platform. With purchases in the past 30 days of iZettle for $2.2bn (SMB brick and mortar payments), Jetlore (commerce software) and now Hyperwallet (marketplace payouts), the company has wisely chosen to focus its M&A budget on merchants in an effort to deepen and diversify its value proposition.

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