PayPal Expands Reach With iZettle Acquisition

PayPal expands into Latin American and European SME online payments.

Payments giant PayPal recently acquired iZettle, a Swedish technology company, cementing its expansion into other parts of the payments sector and increasing its international presence in physical stores. With the acquisition, PayPal is looking to win a larger share of small and medium-size businesses (SMEs) thatuse credit-card payments in Europe and Latin America. Rival payments company Square dominates in the United States, and it’s unclear if PayPal will bring the iZettle technology to the US to challenge it.

This acquisition is just the latest move by PayPal.

In April 2018, PayPal and Safaricom, Vodacom’s 35%-held company in Kenya, announced that users of Safaricom’s M-Pesa mobile wallets would be able to transfer money to and from their PayPal accounts.

“PayPal’s collaboration with M-Pesa is part of the company’s long-term strategy to enable ecommerce and democratize financial services on the African continent,” says Efi Dahan, PayPal’s general manager for the Middle East, Africa and Russia.

PayPal paid a hefty premium for iZettle, at $2.2 billion. iZettle had been preparing to go public with a $1.1 billion IPO. It’s unclear when the deal will pay off for PayPal, but so far the company faces only a few competitors in the market. “The deal allows PayPal to develop omnichannel solutions for SMEs worldwide,” says Pinar Ozcan, an associate professor of strategic management at Warwick Business School, who researches the mobile-payments industry. “This is particularly important as tech giants Apple, Amazon and Facebook are also growing in digital payments. Facebook Messenger payments has been active in Europe since late 2017.”

PayPal is awash in cash and some think this is just the beginning of an acquisition spree. While PayPal is available in 200 markets around the world, some see the iZettle deal as a sign that it wants to reach new segments of the market in countries where it plays a limited role, perhaps even attracting the unbanked. PayPal holdings include Braintree, Venmo and Xoom.

PayPal’s first-quarter 2018 results showed revenue growth up 24% to $3.69 billion. It added some 8.1 million active accounts, with net new actives up 35%. Payment transactions rose to 2.2 billion, up 25%.

Yet all is not rosy, despite these impressive deals and numbers. EBay announced in January that it was getting rid of PayPal as its primary payments processor in favor of Adyen, a Dutch company.