Ebay will buy a former rival of its PayPal service, Braintree, in order to boost PayPal’s mobile presence.
The payment gateway service will be brought in a deal worth around $800 million, and, among other benefits, will provide eBay with Braintree’s Venmo app, which lets mobile users make payments on smartphones and tablets.
40 per cent of eBay’s revenue came from PayPal in 2012, with PayPal’s 120 million-strong user base not growing as quickly in recent years due to competition with services more suited to use on mobile devices.
Braintree was one of PayPal’s main rivals to appear in the last few years, alongside quickly growing services GoPayment and Square Inc.
"This deal makes reasonable sense strategically as it expands PayPal’s distribution and removes a competitor," said RBC Capital Markets analyst Mark Mahaney.
"Braintree was rapidly becoming a potential threat to PayPal," agreed Benchmark Co analyst Daniel Kurnos in a statement to Reuters.
Ebay said that the purchase would result in a loss of one cent per share on its 2013 earnings.