Why Simility Is a Strategic Fit for PayPal’s Portfolio



PayPal’s acquisition of Simility

PayPal (PYPL) has announced the acquisition of Simility for $120 million, which is expected to close in the third quarter of 2018. Simility is a fraud prevention specialist and will thus help PayPal’s online merchants spot fraudsters and, in turn, improve risk management using machine-learning-based technology.

Simility already has some customers that work with PayPal, including OfferUp, Dicks Sporting Goods, and Rebtel. After the completion of the deal, Simility’s tools can be extended to PayPal’s other merchants on its platform.

PayPal’s growing digital payments services

Since separating from eBay (EBAY) in 2015, PayPal has been building itself through partnerships and acquisitions to offer a wide array of digital financial services beyond just online payment processing. According to Statista, the transaction value in the digital payments segment is expected to cross $5.4 trillion in 2022.

The acquisition of Simility seems to be a strategic fit for PayPal, given the rising rate of online fraud that’s denting the growth of e-commerce businesses. According to a study by credit bureau Experian, the rate of e-commerce fraud in the United States has risen more than 30% in 2017.

PayPal’s acquisitions

This week, PayPal also acquired a leading global payout platform called Hyperwallet to enhance its payout capabilities to marketplaces and add new sellers to its platform. Earlier this month, PayPal revealed plans to buy prediction platform Jetlore. Last month, it made its largest-ever acquisition of Swedish payments company iZettle for $2.2 billion. With iZettle in its portfolio, PayPal reportedly expects to give stiff competition to Square (SQ).

Over the past two years, PayPal has also inked deals with Alphabet’s (GOOGL) Google, Facebook (FB), and Baidu to expand its portfolio. It has also teamed up with credit card giants Visa and Mastercard to expand its scale.

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