Payment Methods

iZettle CEO Talks Growth, Pop-Ups, Consolidation

Small business mPOS provider iZettle recently raised €60 million ($63.1 million) in a Series D extension made up of equity from existing investors, as well as debt funding from U.S.-based Victory Park Capital. On top of the new funding, iZettle has also added Maria Hedengren to its team as the company’s new chief financial officer.

With the successful round and the positioning of the CFO, it’s possible that iZettle could soon be gearing up for an IPO.

In a recent interview, PYMNTS’ Karen Webster spoke with Jacob de Geer, founder and CEO of iZettle, about the recent funding round, the company’s growth, broader trends in the payments ecosystem in Europe and beyond, as well as what’s coming up next for the FinTech.

Small businesses across Europe — and, most recently, parts of Latin and South America — use Swedish FinTech iZettle’s payments systems technology and increasingly find financing by way of iZettle’s Advance solution.

While the final numbers are still being tallied, de Geer said, 2016 was good to iZettle. “It was a great year, actually, from a growth perspective. Growth was our main focus for the year, as well as consolidation in the different markets where we have been operating.”

When asked, De Geer neither confirmed nor denied plans for an IPO in iZettle’s near future, though he did say, “The question is, what kind of future will we be seeing? There are a couple of different options—  and all of them are all very compelling. I think that 2017, 2018 could prove to be a couple of very interesting years.”

De Geer pointed to conditions in Europe that have facilitated iZettle’s growth in recent years and that also bode well for its continued growth in the future.

“There are so many individuals all over Europe right now that have had to leave their former jobs for various reasons,” de Geer said. “From the previous financial crisis came a lot of uncertainty. Many people choose different career paths and start their own companies.”

These conditions have led to a massive uptick in new small business, said de Geer. “And with that,” he noted, “comes the challenge to get access to working and end capital. These companies are completely underserved by pretty much every financial institution.”

Some 80 percent of small business failure can be attributed to a lack of access to working capital. De Geer gave an example of how iZettle can help.

“We have a local food truck and catering company in Stockholm that turns over somewhere in the area of a million dollars a year,” said de Geer. “They wanted to expand into restaurants, but no banks would give them a loan because they were perceived as high-risk.”

Enter iZettle’s Advance solution. “Looking at their numbers, since they were using our payment solution, it was so obvious to us that they were eligible for this type of advance,” de Geer said.

Since giving the company its first advance, de Geer said it’s set up two restaurant locations and is correlating growth to using iZettle’s payments system.

Lack of access to capital, said de Geer, is also one of the reasons the industry has seen such a boom in pop-up shops in recent years.

“That whole culture is really putting more demand on our core services,” he said. “It will definitely continue, and I think it will increase tremendously over the next couple of years because people will want to have greater control of their proprietary distribution system or capital or marketing.”

As de Geer looks toward 2017, 2018 and beyond, he sees more opportunities for growth. But he also sees opportunities for industry consolidation. “Looking around the world, there are only a few real players in this industry,” he said. “If you look at it from an efficiency perspective, I’m certain consolidation will continue next year.”

Especially since, de Geer said, while large traditional financial institutions still take a majority of revenue, the underlying technological architecture of payments and financing is coming from the FinTech sector.

“All of a sudden, they are not at the forefront — not in the driver’s seat anymore, even though the big profits are still with them,” de Geer said. “They will become more interested in what’s going on in the FinTech space overall right now.”

Consolidation is also key for de Geer for when the day comes that iZettle is an incumbent financial institution, which, he said, could come sooner rather than later. “There will be new players who will consider us more traditional. We’ll be the incumbents,” he said. “The world is changing much faster compared to where we were two years ago.”

Looking forward to the future, de Geer said that iZettle plans to continue to do what it does best — facilitate small businesses. “We’ll continue to broaden and expand our offering to our merchants,” he said, “offering them the services and solutions that they can’t access from the bigger companies. With that in mind, we’ll keep our focus on expanding our portfolio to keep helping these small businesses grow.”

De Geer noted that iZettle is also looking into bringing together on- and offline payment capabilities. “Online and offline are converging in so many different ways,” he said. “It’s becoming natural.”

As iZettle continues to expand into new markets and build out its portfolio, de Geer noted that one thing is certain: “The biggest conclusion that I’ve drawn in the last couple of years is that no matter which market you enter with payments, they are all so very different.”

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