PayPal’s next phase as its relationship with eBay fades will require a focus on grabbing a greater share of business from online marketplaces and contract workers, two quickly expanding parts of the global economy.
PayPal’s $400 million deal to acquire Hyperwallet will give it a readymade base of technology and relationships that can serve both of those segments.
Hyperwallet specializes in e-commerce platforms and online marketplaces, supporting multi-currency payments in more than 200 countries with disbursement options including cash pickup, prepaid cards, bank accounts, checks and PayPal’s flagship transfer service.
That will combine with PayPal’s 230 million consumers on Hyperwallet’s network. PayPal will be able to combine its core payment app with Venmo’s social payment engine and Hyperwallet to support payments to consumers, contractors and other service providers, said Juan Benitez, general manager of Braintree.
Sales on online marketplaces are about half of all online sales, according to Forrester, which notes about a third of Amazon’s total sales come from third-party sellers.
“These marketplaces have a massive global reach, so anything that you are providing to them has to be wide,” Benitez said.
This portends a market that’s becoming more geographically diverse as it grows. That’s pressuring merchants and acquirers to make investments to accommodate a greater amount and volume of transactions, as well as the ability to handle cross-border payments.
JPMorgan Chase less than a year ago acquired WePay for about $220 million to serve a similar goal of supplying payments for marketplaces that serve micro-merchants. PayPal can also counter Square and Stripe, which have aggressively added merchant services to their existing e-commerce technology for smaller merchants.
The same tools can also serve contract workers, a key element in PayPal’s expansion as its relationship with eBay fades out over the next five years, part of an overall strategy at PayPal to reach third party developers and become nimble as merchant and payment needs change.
“We may see ideas from our users in a case such as this,” Benitez said.
PayPal is already a popular choice for freelance and other gig economy workers, and the company has been adding more security and technology to serve that part of its customer base.
Braintree’s technology has been part of PayPal’s recent evolution toward being a company that uses APIs to connect users to a range of service, and Hyperwallet will fit into that mix, Benitez said.
“There are a wide range of use cases for this,” Benitez said. “The gig economy is one — the commissioned workforce.”
The gig economy is a competitive market, as both banks and fintechs are acquiring and building technology to serve a payroll needs for a diversifying and dynamic workforce that’s about 30% of the U.S. market alone and has widely varying payment needs.
“Payments is a scale game; you can unlock tremendous value with tremendous scale,” Benitez said.