Once in the fold, Braintree will act as a separate entity under PayPal. Braintree CEO Bill Ready will remain at the helm, reporting directly to PayPal President David Marcus. The acquisition's completion is expected before the end of the year.
"PayPal was built on helping entrepreneurs grow great businesses online," said Marcus in a statement. "With this deal I believe that we will accelerate our capabilities for developers, entrepreneurs, merchants and companies that are building the future."
Braintree powers numerous ecommerce Web sites, including Airbnb, LivingSocial, OpenTable (OPEN) and TaskRabbit and expects to process $12 billion over 2013. PayPal, the dominant player in the relatively small online payments industry, processes more than 7.7 million daily payments, and expects a total $20 billion in mobile payments over 2013.
Mobile payments are increasingly a key factor in Braintree's profitability. Venmo, which Braintree purchased in 2012 for $26.2 million, is a mobile payments app which utilizes social networks and offers free money transfers to users.
Facebook (FB) recently made a play in the mobile payments space, activating a feature for autofill billing information when users purchase third-party apps through the social networking site. Facebook noted PayPal, Braintree and Stripe would act as payment processors during the initial phase of the launch.
Last week, Google (GOOG) expanded its mobile payments strategy by launching its Google Wallet iPhone app in Apple's (AAPL) App Store. Google also added Wallet compatibility to its email service Gmail.