PayPal Acquiring iZettle to Compete With Square for In-Store Payments Processing

PayPal this week announced plans to acquire the Swedish-based payments hardware company iZettle for $2.2 billion, with a plan to expand its presence in brick and mortar stores thanks to iZettle's technology. The acquisition will also help PayPal bolster its business across iZettle's main markets of Europe and Latin America (via Bloomberg).

Notably, the purchasing deal marks PayPal's biggest acquisition ever and will put it in the hardware market as a direct competitor to small business-focused company Square. Both Square and iZettle sell payments processing hardware devices that help small businesses conduct both traditional credit card transactions and NFC payments from mobile wallets like Apple Pay.

The deal is now expected to close in the third quarter of 2018, while PayPal says it hopes to "reap the advantages of the merger almost immediately in certain areas."

“Small businesses increasingly want a full suite of capabilities across channels, a one-stop stop,” Dan Schulman, chief executive officer of PayPal, said in an interview. “IZettle was the perfect fit in many ways.”

“When we think about the combinations and capabilities of PayPal and iZettle,” Schulman added, they “set us apart from anyone else.”

When it does close, PayPal will gain in-store capabilities in 11 total markets that iZettle currently resides in: Brazil, Denmark, Finland, France, Germany, Italy, Mexico, Netherlands, Norway, Spain and Sweden. In the announcement, PayPal also mentioned that the acquisition allows for in-store expansion opportunities in other existing PayPal markets where iZettle isn't yet established, including the United States.

In addition to basic payments processing, Square and iZettle give businesses access to other features like invoicing software and in-stock/out-of-stock analytics. Square launched in the United Kingdom in 2017, and in the United States Square has been a partner with Apple over the past few years, launching its original NFC reader that introduced Apple Pay to small businesses back in 2015.

For PayPal, the payments company is planning its push into offline processing as it faces increased competition online. In February, eBay revealed its plan to phase out its 15-year partnership with PayPal and eventually favor payments competitor Adyen on the eBay marketplace. Then in April, Visa, Mastercard, Discover, and American Express announced an initiative that will combine their online payment options into "a single button," directly competing with PayPal for online shoppers' attention.