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PayPal agrees to buy payments start-up iZettle for $2.2bn

PayPal’s purchase of point-of-sale firm iZettle, the fintech start-up that helps small businesses avoid some of the prohibitive costs associated with taking card payments, will be the company’s biggest acquisition to date

IZettle sells card readers that connect to smartphones or tablets, helping small companies to avoid some of the prohibitive costs associated with taking card payments. Image: iZettle

On May 17, online payments platform PayPal announced it had signed an agreement to buy Swedish point-of-sale firm iZettle for $2.2bn – the company’s largest acquisition to date.

Founded in 2010, iZettle gives small businesses access to the financial tools needed to compete with larger enterprises. The company sells card readers that connect to smartphones or tablets, helping small companies to avoid some of the prohibitive costs associated with taking card payments.

IZettle has mainly operated in Europe and Latin America but, with PayPal’s backing, the possibility of an entrance into the US market becomes more plausible

The agreement comes just before iZettle’s proposed IPO, which was scheduled for the end of May. The Stockholm-based company had been aiming to achieve a valuation of $1.1bn, but was presented with double that amount by PayPal. Prior to this deal, PayPal’s biggest acquisition was the $890m purchase of Xoom in 2015.

“The combination of PayPal and iZettle brings together iZettle’s in-store expertise, digital marketing strength and mobile point-of-sale technology with PayPal’s global scale, online and mobile payments leadership, and trusted brand reputation to support merchants and consumers in more ways,” said PayPal CEO Dan Schulman in a statement.

Until now, iZettle has mainly operated in Europe and Latin America but, with PayPal’s backing, the possibility of a stronger entrance into the US market becomes more plausible. IZettle does not currently face too much direct competition from its main rival, the NASDAQ-listed Square, as the companies’ operations only really overlap in the UK. Competition is set to intensify, however, as both companies expand their businesses.

The $2.2bn also represents a massive financial windfall for the Swedish company, which, as of last year, was still operating at a loss of approximately $27m. Jacob de Geer, iZettle’s founder, will continue to lead the company after the deal is finalised, which is expected to happen in the third quarter of 2018.