Payments giant PayPal is set to make its “most transformative acquisition” yet, agreeing to buy discounts platform Honey for nearly $6 billion ($US4 billion).

The acquisition, which will be mostly in cash, will be PayPal’s largest acquisition to date, and comes amid growing competition in the payments space from the likes of Apple, Facebook and Google.

Honey, founded in 2012 and based in Los Angeles, provides a deal-finding web browser add-on and mobile application which allows users to track prices, get alerts, make lists and browse offers. The service automatically tries all of the eligible promotion codes during the checkout process and applies the one that earns the most savings.

The Honey browser extension now works with 30,000 merchant websites, and the company’s 17 million monthly active users have now saved $US2 billion to date.

The deal will give PayPal a presence in its users’ entire shopping experience, from searching online to actually buying a product.

“Honey is amongst the most transformative acquisitions in PayPal’s history,” PayPal CEO and president Dan Schulman said. “It provides a broad portfolio of services to simplify the consumer shopping experience, while at the same time making it more affordable and rewarding.

“The combination of Honey’s complementary consumer products with our platform will significantly enhance our ability to drive engagement and play a more meaningful role in the daily lives of our consumers.

“The combination of Honey and PayPal adds another significant and meaningful dimension to our two-sided platform.”

PayPal has about 300 million users and a network of 24 million merchant partners, who will now be able to provide more personalised promotions to their own users.

The huge deal comes at a time when PayPal is facing unprecedented competition in the payments space.

Apple boss Tim Cook recently revealed that Apple Pay has now surpassed PayPal’s transaction volume, with 3 billion transactions in the last quarter alone, while Facebook Pay has the potential to rise above the rest of the competition.

The co-founders of Honey will be joining PayPal as part of the deal and working on product integration and scaling their technology to the far bigger user base.

Honey’s 350 employees will remain in the company’s office in LA.

“Combining PayPal’s assets and reach with our technology, we can build powerful new online shopping experiences for consumers and merchants,” Honey co-founder Ryan Hudson said.

“We’ll have the ability to help millions of retailers efficiently reach consumers with offers that deliver more and more value to Honey members.”

The big acquisition is expected to close in the first quarter of next year, subject to regulatory approval.

Australian financial intelligence watchdog AUSTRAC ordered an independent audit of PayPal over its compliance with international funds transfer obligations in September, with concerns it is being used by child exploitation rings in Asia.

The external auditor is expected to report back early next year.

The inquiry will look at PayPal’s compliance with its international fund transfer obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act and record-keeping rules.