Paypal acquires iZettle, a US$ 2 billion move toward brick-and-mortar commerce

For those who have been observing the mPOS market for a while, the news came as a shock: Paypal is acquiring Sweden-based iZettle for US$ 2.2 billion (EUR 1.87 billion), making it Paypal’s largest acquisition to date.

Even the operation sequence is a surprise. iZettle has been in the mPOS market for a while, with a presence essentially in Western Europe, as well as Brazil and Mexico. The company achieved SEK 966 million (EUR 94 million) gross revenue in 2017 and anticipates its 2018 sales to reach SEK 1,440 million (EUR 140 million). On May 8, iZettle announced it was going for an IPO on Nasdaq Stockholm with an objective set at raising SEK 2 billion (EUR 195 million). Then Paypal came offering US$ 2.2 billion (EUR 1.87 billion) for the company, or 20 times the 2017 revenue. Of course, such an offer cannot be refused; this lead Jacob de Geer, iZettle CEO & co-founder, to publish a statement emphasizing the excellent relation with PayPal’s President and CEO Dan Schulman and his team and accepting the offer for an expected settlement in Q3/2018. iZettle will remain in Sweden and become a center of excellence for PayPal’s in-store product and services offerings for small businesses.

iZettle started purely as an mPOS developer: they proposed payment card readers that had to be connected to a smartphone to operate. Then, the company expanded in other areas of the payment business: they propose an iZettle reader that includes a PCI-PTS compliant pinPAD and a display, but still relies on a smartphone for communication. iZettle also proposes a point of sale app that runs on a tablet or a laptop, as well as the needed payment environment, for reporting, invoice management, transaction analysis, etc. Now, after eight years of existence, iZettle positions itself as “the leading small business commerce platform in Europe and Latin America,” with a relation to 413,000 merchants as of the end of 2017.

Some analysts see Paypal’s acquisition of iZettle as means to counterattack Square, which has also expanded its offer compared to its original pure mPOS positioning and is looking at worldwide expansion. However, Square and iZettle are only in frontal competition on the UK market.

Many players in the payment industry have been after small merchants, considering they are the only remaining growth market segment. Paypal has already an existing relation with 19 million merchants worldwide, the iZettle acquisition will allow them to propose a better offer and progress in the process of including small merchants worldwide in the global card payment systems.