Acquisitions tend to generate a lot of heat and headlines when first announced — usually accompanied by the perfunctory press releases about potential being unlocked and all of the “synergies” that the new combination will yield.
Early acquisitions are also usually marked by unending conversations about how the two firms in the mix will become more than the sum of their parts and how there's nothing left to do but wait for the glorious future.
“Most of the time, 1+1 in acquisitions comes out to 1.5 at best. At worst, it comes out to zero,” Braintree GM Juan Benitez told Karen Webster on the eve of Braintree’s three-year mark as a member of the PayPal family. “[The PayPal/Braintree acquisition] has been the best of both worlds.”
In some sense, this is the expected reaction from Benitez, but the proof, he told Webster, is in the numbers.
With the quarter closing out rapidly around us and earnings reports looming around the corner, Benitez wasn’t quite ready to comment on hard figures. But, he said, speaking broadly, Braintree processes today — in Q2 2016 — in a single day what it was processing per year in the early days of the firm.
“To nearly triple every year after an acquisition, that doesn’t happen very often,” Benitez told Webster.
But then, it also doesn’t happen very often that payments players are trying to do what PayPal and Braintree have made it clear of late they are going after and even rarer for those aspirations to be backed up with enough scale to meaningfully deliver on it. Because, said simply, according to Benitez, PayPal wants to be the operating system for digital commerce.
And Braintree plays a key role in making that happen.
The Unique Outlook
As the acquisition is approaching its third anniversary, the numbers tell an encouraging story. There is no rational way to argue that processing 25x more transactions today than it did before the acquisition isn’t progress.
But the real progress, Benitez told Webster, isn’t in the transaction counts alone, or even Braintree’s widely expanded scale. It’s about what the merged platform of Braintree and Paypal really makes possible for all the interested parties in the digital commerce ecosystem — the merchants, the consumers and the developers who build the eCommerce functionality.
With the Braintree SDK, developers get what Benitez described as “the one-stop shopping” experience for payments functionality. Instead of making choices about which payment method to flip on — cards, PayPal, Apple Pay and (coming soon) UnionPay — the SDK means it all goes on at once. Merchants don’t have to decide and prioritize which payments come first, second or third and endure the pain and the agony of making those integrations happen. With Braintree, Benitez said, they are just able to offer a checkout that is seamless and offers any consumer a method of payment they can use to complete the transaction with, which is really all the merchant wants.
“There really isn’t another game in town in payments that can solve this kind of problem,” Benitez told Webster. “The one-stop shop for small entrepreneurs and websites — that is something that is pretty uniquely enabled by our integration with PayPal, just given the scale.”
Because scale is the magic that makes the world of payments and commerce go round.
The Power Of Scale And The Tradeoff Involved
In the early days of the integration — after PayPal was integrated as Braintree’s first non-card payment method — that push for “available everywhere” began with the rollout of One Touch.
That was a big first step, Benitez noted, because it gave PayPal merchants a unique edge: the ability to connect easily to consumers on all mobile touchpoints — web or app-based — in a way that didn’t have the customer bouncing off their page to log into their preferred method of payment.
As it turns out, there is no such thing as quickly enough, and often, it effectively broke a conversion mid-stream. With One Touch up and running, those 180 million PayPal customers worldwide could do something new and special.
“With One Touch, customers can rely on the safety and security of PayPal without having to log in,” Benitez noted.
And while that step was crucial, it was still just an early precursor to what Benitez called the real strategic shift going on in the background.
Benitez said that the real outcome of the Braintree/PayPal combo is that PayPal has been able to focus away from viewing the “buy button” as the main commerce event to fulfilling its ambition as the operating system of commerce — the “great enabler” for the digital ecosystem that enables commerce anywhere that a consumer and a merchant meet through a portfolio of capabilities. He pointed to Paydiant as a new way of thinking about in-store payments by tying in rewards and line busting and to Xoom as a way to democratize digital money.
“This is a very aligned vision of being a united operations system of commerce and powering all of the process, not just the buy button.”
Benitez said that part of what makes he and the Braintree team the proudest of what they have been able to accomplish with PayPal is their role in helping merchants.
“We’ve seen a lot of successful merchants on our platform,” he noted, citing the big guys, such as Airbnb and Jet.com, to the small and developing up-and-comers, who hope to crack open their market niche.
“We can’t take the credit for those innovators' successes,” Benitez told Webster. "But if we took a bit of the complexity away from them and let them focus on their business, well, that feels pretty good.”
And as Braintree celebrates its third year as a part of the PayPal digital operating system play, we imagine it is feeling a little more than “pretty good.”