PayPal has agreed to buy the automated coupons platform Honey for $4 billion in its largest acquisition to date, the payments giant announced Wednesday afternoon.

Honey is a browser extension that scours the internet for coupons, promo codes, and other deals, promising users they'll never have to overpay for purchases if it can do the tedious work of finding them a discount. It also offers a mobile shopping assistant and price-tracking tools. Honey boasts 17 million monthly active users that have saved $1 billion at 30,000 online retailers with the browser extension in the last year. PayPal currently boasts more than 275 million consumers and 24 million merchants across 200 markets.

For PayPal, whose customers comprise both consumers and merchants, this deal helps the company move up the funnel to discovery. A company spokesman said PayPal could embed some Honey capabilities into the PayPal and Venmo apps to provide a Pinterest-like experience for shoppers that use its payment apps. It's all about giving more people — who have more options than ever these days for how to pay for things — more reasons to use PayPal or Venmo.

The impact could be even greater for its merchant customers. The company will soon absorb an abundance of purchasing intent data it can use to help create more personalized and targeted promotions to consumers to increase customer acquisition and sales.

The rewards market has boomed in the last few years. Personal finance content and advice sites NerdWallet, Square's Cash App, and even Chase have integrated cash-back features into their apps. Rakuten, the Japanese e-commerce giant that bought cash-back platform Ebates in 2014, kicked off 2019 with a Super Bowl commercial advertising its U.S. presence and rebranding. The rewards app Drop, which gives users points for shopping and gift cards to redeem with them, raised $21 million in Series A funding last year.

Even younger fintech startups are trying to innovate based on rewards — especially since the Fed has lowered rates and the high-interest savings account bonanza is at a halt. This year Stash launched a feature that lets users earn company stock back on their purchases and Tally launched an app that incentivizes saving with rewards. There's even a browser extension that lets users earn bitcoin.

The rise of alternative payment options — like PayPal and Venmo — is changing how people shop, and innovative e-commerce and other digital experiences are raising consumer expectations for on-demand and real-time services. It's increasingly difficult for credit card issuers to reinforce customer loyalty and influence spending when points take weeks or even months to be reflected in consumers' credit card statements and made available to redeem. Apple made that a key part of its marketing of the Apple Card, which deposits customers' earned cash-back balance onto the Apple Pay Card right away.

PayPal, which is frequently vocal about its mission to democratize financial services, sees the Honey deal as another step forward on that mission by equipping consumers with more information. It isn't enough to be a checkout button; the company has to be present and add value in all aspects of how consumers conduct their financial lives, the spokesman said.

This will be PayPal's largest acquisition to date, followed by its $2.2 billion acquisition of the Swedish payments processor iZettle last year, and its first acquisition in the rewards space. It is expected to close in the first quarter of 2020 and be accretive to PayPal's non-GAAP earnings per share in 2021.

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