eBay (NASDAQ:EBAY) announced Tuesday that its payments business PayPal has acquired Card.io, a San Francisco-based start-up that provides technology for developers to capture credit card information by using the camera on a smartphone. ((PayPal Acquires card.io)) The technology makes it easier for mobile apps to scan credit cards and saves users the time it takes to enter a 16-digit card number. Payments can be made using the data captured from pictures of credit cards taken by the phone’s camera. Financial details of the deal were not disclosed by either party.
The mobile payments space was dominated by Square before PayPal came along. The latter challenged the former by launching PayPal Here, its mobile card payment offering in March. It uses a thumb-sized triangular card reader to swipe credit cards and needs to be plugged into the smartphone device.
Square has a similar offering but PayPal’s product might have certain advantages over it. While a number of people are unaware of Square, PayPal enjoys wide brand recognition and eBay is certain to spend heavily on advertising its service. PayPal Here can also use the phone camera to scan cards and paper checks and allow customers to pay for things using the PayPal account. PayPal has been working with Card.io to fold their technology into its own and has now decided to buy the company. ((PayPal folds startup into its smartphone wallet))
Despite the acquisition, Card.io will continue to provide kits to developers who write similar card scanning applications for Android or Apple devices.
Smartphone and tablet devices are becoming integral to modern lifestyles and payment service providers see an immense market opportunity in the space. We believe that PayPal’s most recent move is in line with eBay’s strategy to capture a significant chunk of this opportunity. It has been making the right moves but the last word is yet to be heard. Google (NASDAQ:GOOG) with its Google Wallet service and the Isis digital wallet platform are still in contention. Overall, PayPal has a bright future in view of the moves it has been making in the last two or three months and we expect it to constitute a greater share of eBay’s business in future.
We currently have a $47.50 Trefis price estimate for eBay, which stands nearly 18% above the market price. eBay is scheduled to announce its Q2 2012 earnings today and we shall be updating our estimates accordingly.