PayPal checks out with iZettle in $2.2bn deal

PayPal to take on Square in the small-business payments market following iZettle acquisition

PayPal has concluded a deal to buy Swedish mobile payments company iZettle in a $2.2 billion all-cash deal that will pit the online payments company squarely against Stripe and Jack Dorsey's Square. The deal - the largest in PayPal's history - is expected to close in the third quarter.

While PayPal predominates as an alternative payment mechanism for websites and other online merchants, it lacks the kind of hardware and infrastructure to enable small business owners to take card payments via mobile technology.

Unlike conventional payment solutions, iZettle, Square, Stripe and others don't require a landline and can therefore be deployed anywhere with mobile reception.

PayPal has reportedly courted iZettle for some time, but wasn't keen to push the boat out. However, a looming IPO for iZettle not only forced PayPal's hand, but also forced it to dig deep - the IPO was expected to raise around $1.1 billion.

The acquisition will take PayPal into a number of markets where it isn't currently active, with iZettle expanding into Latin America following a tie-up with Spanish banking giant Santander, who also invested €5 million in iZettle back in 2013 when that deal was inked.

Santander will therefore cash-out very profitably, as will the European Investment Bank, which invested €35 million in September last year.

Santander also offers iZettle technology to customers in the UK, as well as Spain, Mexico and Brazil, and iZettle has agreements with Visa International and MasterCard.

"Small businesses are the engine of the global economy and we are continuing to expand our platform to help them compete and win online, in-store and via mobile," said PayPal president and CEO Dan Schulman. "iZettle and PayPal are a strategic fit, with a shared mission, values and culture - and complementary product offerings and geographies.

"In today's digital world, consumers want to be able to buy when, where and how they want. With nearly half a million merchants on their platform, Jacob de Geer and his team add best-in-class capabilities and talent that will expand PayPal's market opportunity to be a global one-stop solution for omni-channel commerce."

Based in Stockholm, iZettle was founded in April 2010 by Magnus Nilsson and Jacob de Geer, with the company de Geer's fourth start-up.