More Consolidation in the Financial Technology Market
Last week, PayPal revealed it’s buying Swedish financial technology firm iZettle for $2.2 billion. The acquisition will allow PayPal to expand in Europe and Latin America, markets where it lacks an extensive offline presence. The Swedish business operates in Brazil, Denmark, Finland, France, Germany, Italy, Mexico, the Netherlands, Norway, Spain and Sweden.
Stockholm-based iZettle, which had plans to go public this month, was founded in 2010 by Jacob de Geer and Magnus Nilsson. It offers small businesses a miniature credit card-reader that turns smartphones and tablets into payment registers. Investors in the company include Mastercard, American Express and Santander, as well as venture capital firms like Index Ventures and Dawn Capital.
For its part, PayPal already has a presence in more than 200 countries, and is used by major retailers around the world for online transactions including big names such as Walmart and Best Buy. However, it has limited exposure at physical point-of-sale terminals. It has had a strategic goal of boosting its point-of-sale payments capabilities in the US and globally, but this effort has seen limited success.
In 2017, Square, a major PayPal rival, entered the UK with an eye on the European market. The vast majority of Square’s revenue comes from the US, but global expansion has been a central aim for the company (see Square’s Payment Service Launches in the UK).
The purchase of iZettle brings further consolidation to the financial technology sector and heightens competition between PayPal and Square. iZettle has made significant headway in building out a point-of-sale business, thanks to its card-reading dongles for smartphones and tablets. Like Square, iZettle began its business by addressing a gap in the market, recognising the needs of small retail businesses that needed to accept cards.
One asset PayPal brings to iZettle is name recognition. Square has built brand awareness, while iZettle is lesser known in many markets. With the financial backing and potential branding of PayPal, iZettle can reach more businesses as well as more markets. For PayPal, the deal will advance its ambitions for international expansion, as it tries to capitalise on the growing volume of purchases being made on mobile phones and tablets.
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