Summary:

PayPal tried to revamp its developer platform this spring for the new mobile commerce reality, but it realized it wasn’t moving fast enough. It decided to buy Braintree, which already had sophisticated tools in place.

eBay’s $800 million purchase of Braintree is primarily motivated by one big factor: PayPal’s need for a nimble and flexible commerce platforms that met the demands of the new generation of startups and mobile app developers. That’s according to John Lunn, PayPal’s global director of developer networks, who spoke with GigaOM Thursday morning.

To that end, PayPal will make Braintree PayPal’s face for the developer and e-commerce startup community. Lunn said that after the purchase PayPal will keep its own developer programming in parallel to support its existing customers, provide financial services that Braintree doesn’t yet offer and support regions Braintree hasn’t yet reached. But eventually PayPal will offer its developer-facing services through Braintree.

“Braintree is a company that works at startup speed, which is what we need,” Lunn said.

Braintree CEO Bill Ready (right) with his soon-to-be boss, PayPal President David Marcus

Braintree CEO Bill Ready (right) with his soon-to-be boss, PayPal President David Marcus

Founded in 2007, Braintree built its reputation as a startup’s startup, building the payments and transaction engines for emerging e-commerce and collaborative consumption companies like Airbnb, Fab.com and Uber. Braintree occupies the middle ground between small business transactions powered by PayPal and massive e-commerce outfits, which rely traditional banking institutions like Chase Paymentech.

That business model proved quite successful, especially this last year as Braintree began to focus more on mobile transactions and branched out overseas. In the space of a year, Braintree has gone from processing $4 billion in annual transaction to $12 billion – a third of that volume from mobile phones and tablets.

Braintree’s success in mobile was particularly attractive to PayPal, Lunn said. While PayPal has developed its own mobile apps and processes plenty of mobile payments on its own (it’s on pace to process $20 billion in transactions this year), Lunn admitted its developer tools and APIs until recently were still stuck in the age of web transactions.

PayPal mobile app walletIn March, PayPal decided to revamp its developer platform to reflect the new mobile first model, but Lunn said it realized it wasn’t quickly moving enough. While PayPal was trying to build basic mobile tools, Braintree and competitors like Stripe were already launching more sophisticated products like community marketplaces, where individual transactions could involve multiple sellers.

Ultimately, Lunn said, PayPal has the technology and resources to offer every service Braintree delivers and more. It just doesn’t have the ability to deliver those as quickly and easily to developers. To that end, PayPal will bring its full complement of financial services to Braintree’s development platform. The first thing you should expect to see – assuming the deal closes in Q4 as expected – is Braintree supporting transactions in a lot more countries.

“We have people on continents Braintree hasn’t even been to yet,” Lunn said.

Once the deal is final, Braintree will run as a PayPal subsidiary – much the same way PayPal operates as an eBay subsidiary, Lunn said – led by Braintree CEO Bill Ready. eBay said Braintree’s Chicago-based management team and employees would remain in place.

The one big question mark is Venmo, the mobile payments app Braintree bought last year and which directly competes with PayPal’s core peer-to-peer payments service. Lunn said PayPal would give more details on Venmo’s eventual fate after the deal closes.

Correction: An earlier version of this post incorrectly stated PayPal would scrap its own developer program. PayPal will run its developer program in parallel with Braintree after the acquisition, but will eventually offer PayPal services to app developers directly through Braintree.

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