PayPal’s Pledge: CEO Commits to $3 Billion a Year in M&A Spending

PayPal President and CEO Dan Schulman told a German business daily, Handelsblatt, that the spending spree the company has been on in over the past few years (five acquisitions in the past 24 months) is not slowing down yet.

“We have a healthy balance sheet and we are ready to put it to work to buy more companies,” Schulman told Handlesblatt this week, adding that the company was prepared to invest up to $3 billion a year on acquisitions geared toward “specific capabilities.”

Some of these specific capabilities include fraud prevention, courtesy of PayPal’s acquisition of Simility for $120 million; merchant payouts thanks to its purchase of Hyperwallet for $400 million; and even AI-powered marketing technology with its pick up of Jetlore this spring for an undisclosed sum.

But PayPal’s biggest buy of 2018 so far is clearly the $2.2 billion in cash spent on Swedish payments startup iZettle, which the company acquired in May. Referred to as the “Square of Europe,” iZettle is the largest acquisition in PayPal’s history and will help put the company’s service in hundreds of thousands of brick and mortar stores, and help PayPal compete with rivals – like Square.

In addition to a busy acquisition pace, PayPal has been making friends and influencing people, as well, of late. The company sold its consumer credit receivables business to Synchrony for $6.9 billion earlier this month. Schulman noted at the time that the move would help the company invest in other areas of the business or fund future acquisitions. PayPal expanded its partnership with Google Pay in May, making PayPal as a payment option throughout the Google ecosystem. Also that month, the company extended its agreement with Visa to speed the adoption of digital and mobile payments in Canada. In April, PayPal teamed up with Yahoo to make PayPal subsidiary Braintree available to online merchants using Yahoo Merchant Solutions and Yahoo Stores platforms.

PayPal demonstrated its Instant Account Creation solution at FinovateEurope 2012. Founded in 1998 and headquartered in San Jose, California, PayPal is a publicly-traded company on the NASDAQ under the ticker symbol “PYPL.” PayPal has a market capitalization of more than $100 billion.

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Synchrony to Buy PayPal’s Consumer Credit Receivables

Building on its 14-year strong relationship with PayPal, Synchrony Financial has officially become the exclusive issuer of PayPal credit in the U.S. for the next 20 years. Connecticut-based Synchrony has agreed to buy $7.6 billion in PayPal’s receivables for $6.9 billion.

The sale, which was originally announced in November of 2017, consists of PayPal’s U.S. consumer credit receivables portfolio, totaling $6.8 billion, as well as $0.8 billion in participation interests in receivables held by unaffiliated third parties.

Synchrony has issued PayPal-branded credit cards to consumers since 2004 and the two have expanded that agreement to include the PayPal Extras Mastercard and the PayPal Cashback Mastercard through 2028.

In the press release, Dan Schulman, president and CEO of PayPal said, “Our agreement with Synchrony accomplishes every goal we set out for our asset light strategy. We look forward to working with Synchrony to double down on our innovative consumer credit experiences for our customers and profitably grow the portfolio over time.”

As Schulman alluded to in his comment about the company’s “asset light strategy,” this move frees up liquidity for PayPal, enabling it to use the cash to invest in other areas of its business or perhaps to fuel additional acquisitions. The California-based company has been on a buying spree as of late– having made two acquisitions days apart last month (Hyperwallet followed by Simility), marking PayPal’s fifth acquisition in the past two years for a total of 17.

A familiar face in the alternative banking space, PayPal was founded in 1998. PayPal’s Braintree presented at FinDEVr New York 2016. The company also showcased its Instant Account Creation feature at FinovateFall 2012. PayPal’s market cap sits at $98 billion.

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PayPal Acquires Simility for $120 Million

Just days after announcing its decision to purchase Hyperwallet, PayPal is back – purse in hand – for another big buy. The company will acquire fraud prevention and risk management specialist Simility for $120 million.

“This acquisition, like the acquisitions of Swift Financial, iZettle, Jetlore, and Hyperwallet that we’ve announced in the last twelve months, is part of a concerted effort to strengthen the suite of services we can provide to merchants in order to become the one-stop solution for global commerce,” Bill Ready, PayPal COO and EVP, wrote at the company blog.

Ready noted that PayPal has long been interested in the company, having invested in them in 2017, and currently owns 3% of the firm. He complemented the Palo Alto, California-based anti-fraud company’s technology and the way it “allow(ed) merchants to adjust individual risk rules to reduce fraudulent payment activity and, in some cases, verify transactions that may have otherwise failed.”

The acquisition is anticipated to close in Q3 of this year. Simility CEO Rahul Pangam, along with his team, will report to VP of Enterprise Services, Platforms Tushar Shah. PayPal will also pick up an office in Hyderabad, India, which Ready said “enhanc(ed) our presence in a key strategic market.”

A veteran of our developers conference FinDEVr, Simility showed how its advanced machine learning technology provides businesses with an adaptive anti-fraud solution. The company’s presentation, Fraud Mutates – Detect, Understand, and Block It, showed how a combination of flexible data ingestion and signal analysis – supported by advanced ML modeling and human analysis can help secure new account originations and wire transfers, support AML efforts, prevent account takeover, and more.

“Our vision for Simility was to create an adaptive risk management platform that empowers organizations operating in a digital world to manage an evolving fraud and risk landscape where data breaches are the new normal,” Simility’s Pangam said. “We are excited to enter the nest phase of our growth with PayPal and are thrilled to join them to help drive the next generation of payment and commerce solutions while scaling our business together.”

Founded in 2014, Simility had raised more than $24 million in funding prior to today’s announcement. The company has spent the summer adding executive talent: hiring Anupam Bagri as Director of Sales and Business Development for India and Asia-Pacific in the first half of June, and appointing Vanita Pandey as Vice President of Marketing and Product Strategy just last week.

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Hyperwallet Sells to PayPal for $400 Million

Eighteen years after its launch, merchant payout platform Hyperwallet is receiving a payout of its own, to the tune of $400 million. The California-based company sold to payments pioneer PayPal this week, marking PayPal’s fifth acquisition in the past two years and its 16th total.

Hyperwallet helps businesses with mass payouts for earnings, commissions, and royalties payments and is best known for supporting payments in the gig economy. Some of the company’s more notable clients include HomeAway, Tilr, and Scentsy. In a blog post, Hyperwallet CEO Brent Warrington said, “Combining forces with PayPal will not just enhance our payout solutions but enable us to provide an integrated suite of payment capabilities to ecommerce platforms and marketplaces almost anywhere in the world.”

PayPal already has a solid foothold in the mass payout market, serving players such as Uber, Airbnb, and eBay. However, the company notes the acquisition will help it provide PayPal and Braintree merchants with “a comprehensive payments solution, including Hyperwallet’s localized, multi-currency payment distribution capabilities in more than 200 markets with numerous disbursement options, including prepaid card, bank account, debit card, cash pickup, check, and PayPal.”

The deal is expected to close in Q4 of this year. After the acquisition is finalized, the Hyperwallet team will report to Braintree General Manager Juan Benitez.

Hyperwallet most recently presented at FinDEVr Silicon Valley 2016, where Bill Crowley, Chief Product Officer, and Blair Olynyk, Software Architect, gave a presentation titled, Pay the Planet: Implementing Frictionless Global Payout Distribution. Earlier this spring, Hyperwallet teamed up with Lyric Financial to bring advance royalty payments to artists. Last December, the company opened its first Asia Pacific office in Australia and soon after began offering disbursements from Amazon’s Australia marketplace.

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This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

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