eBay Inc.( NASDAQ: EBAY) agreed to buy payment platform Braintree for about $800 million in cash, in a bid to strengthen its own payment service provider PayPal’s presence in mobile and tablet payment services.

The deal is expected to give PayPal an edge over its rivals in a growing but crowded payment-service market and also give it access to Braintree’s Venmo application, which allows users to transfer money using their mobile devices for free.

"We believe that this deal makes reasonable sense strategically as it expands PayPal's distribution and removes a competitor," Mark Mahaney, an analyst with RBC Capital Markets, told Reuters.

Chicago-based Braintree, one of the faster-growing payment companies, currently processes more than $12 billion in payments annually, while three years ago, it was processing only about a fourth of this amount. More than a third of Braintree's business comes from mobile and tablet payments.

"It was rapidly becoming a potential threat to PayPal," Daniel Kurnos, an analyst at Benchmark Co, told Reuters.

Braintree’s clients include Airbnb, an online hotel booking service, and Uber, a transport service app maker, and online restaurant booking service, OpenTable Inc., among others.

PayPal, on the other hand, has about 120 million users worldwide and has dominated the online payment service segment for years, but the company, in recent years, is facing increased competition from rivals such as Stripe Inc., Google (NASDAQ:GOOG), Lemon, and Square Inc.

About 40 percent of San Jose, Calif.-based eBay’s revenues come from PayPal, which it acquired in 2002. PayPal estimates that it processes more than $20 billion in payments through its mobile-payment platform this year.

eBay will retain Braintree's 200 employees and the latter will operate as a separate division, the company said in a statement. 

Shares of eBay rose about 4.4 percent on Nasdaq on Thursday and were up by about 4.5 percent in pre-market trading on Friday.