Payments

PayPal is making inroads into physical commerce

  • PayPal acquired Swedish payments firm iZettle for $2.2 billion -- double its pre-IPO valuation
  • iZettle lets PayPal grow its reach at physical points of sale in 11 new markets, a platform to offer other small-business services
close

Email a Friend

PayPal is making inroads into physical commerce

With PayPal’s recent acquisition of Swedish payments firm iZettle, it’s set up to become an operating system for digital commerce — like Square.

While PayPal is a major player in digital e-commerce, the iZettle acquisition lets it gain a foothold at the physical point of sale — an area it has struggled in and where companies like Square and iZettle have captured market share. It also opens up possibilities to improve offerings to business clients in new markets, including capital loans. PayPal did not respond to a request for comment on whether it intends to scale iZettle’s technology beyond iZettle’s core markets.

“By getting iZettle, they get a player in the market that’s already established and has a large and growing base of small businesses that use iZettle to take payments at the point of sale,” said Jacob Morgan, a senior analyst at Forrester.

On Thursday, PayPal closed the $2.2 billion deal — its biggest acquisition yet — for iZettle’s mobile point-of-sale technology for small businesses, allowing PayPal to reach 12 new markets and add in-store capabilities in 11 of them. It also offers PayPal opportunities to expand in-store payments capabilities in existing PayPal markets and the “acceleration of omnichannel commerce solutions” in Australia, U.K. and the U.S.

Founded in 2010, iZettle, sometimes called the “Square of Europe,” developed what it claims to be the first chip-card reader and software for mobile devices. iZettle scaled up quickly; by 2013, homeless Stockholm residents began using the technology to take card payments. It operates in Brazil, Denmark, Finland, France, Germany, Italy, Mexico, Netherlands, Norway, Spain and Sweden. iZettle also rolled other small-business services, including loans through iZettle Cash Advance, which are cash advances on future sales.

iZettle has nearly half a million customers. While Square just launched in Europe last year, iZettle is a long-established player in European markets. By onboarding iZettle customers, it bolsters PayPal’s competitive position and creates an opening for it to roll out additional services for small-business customers, a segment it considers underserved. According to PayPal’s investor presentation on the deal, iZettle also brings local brand affinity among merchants in new markets.

“By buying iZettle, you’re buying a bunch of merchants and can offer a really elegant solution [for merchants]; they’re also becoming merchant acquirers and can offer incentives for them,” said PayGility Advisers partner David True.

Expanding its reach to the physical point of sale is an acknowledgment that mobile payments are still a futuristic concept for many consumers, and creating an infrastructure for physical card payments to small merchants opens up new lines of revenue.

“Only 10 percent of total retail sales reside in the e-commerce,” Javelin Strategy director of payments Michael Moeser recently told Tearsheet. “The remaining 90 percent of purchases are still made at physical stores. While e-commerce takes 50 to 75 basis points of share every year, it’s not fast enough for some of these e-commerce players.”

0 comments on “PayPal is making inroads into physical commerce”

Outlier OpinionsMakers

Payments, Sponsored

Visa accelerates innovation of global money movement with new Visa Direct Preferred Partner program

  • Visa Direct solution providers can now access the right business tools, technical training, sales, and go-to-market resources to help build successful global money movement solutions.
  • With over 25 global partners enrolled in the program to date, the program has plans to expand to three additional countries in the coming months.
Visa | August 10, 2022
Member Exclusive, Payments

Payments Briefing: What do FIs need to know about payments in the metaverse?

  • This week, we look at how and why traditional FIs and fintechs should be thinking about payments in the metaverse.
  • We also discuss why card giants like Mastercard, Visa, and Amex are getting involved in sonic branding.
Ismail Umar | August 04, 2022
Payments, Power of Payments Podcast

Power of Payments Ep. 11: ‘There’s a lot of heart in our business when you really understand our customers’ – Remitly’s Matt Oppenheimer

  • Matt Oppenheimer, co-founder and CEO of Remitly, joins host Ismail Umar on this week’s podcast.
  • He talks about the evolution of the remittance industry over the last decade, the changing needs of Remitly's customers, the potential role of crypto in remittances, and the future of global money movement.
Ismail Umar | August 01, 2022
Payments

Marqeta’s Vidya Peters on the evolution of consumer behavior and payment trends

  • What is Marqeta doing differently in payments?
  • Consumer behavior underwent lasting changes during the pandemic -- how can the tech behind digital transactions keep pace?
Sara Khairi | July 18, 2022
Payments, Podcasts, Power of Payments Podcast

Power of Payments Ep. 10: Digital payments and overspending, Revolut Reader, mobile wallets vs physical wallets, and more

  • This week, we discuss how digital payments make it easier for young consumers to overspend, and how the global microchip shortage is impacting the payments industry.
  • We also talk about Revolut's first venture into in-store payments, as well as the growing level of consumer trust in mobile wallets.
Ismail Umar | July 15, 2022
More Articles