Partnerships / Acquisitions

Who Wins And Loses In PayPal’s iZettle Deal

PayPal last week announced it will acquire Swedish payments company iZettle in a cash deal valued at $2.2 billion, which is expected to close in the third quarter.

It’s one small step for PayPal and one giant leap for iZettle toward creating a worldwide “one-stop solution for omnichannel commerce,” as PayPal President and CEO Dan Schulman said in a statement.

PayPal operates in 200 countries, while iZettle is present in just 12 across Europe and Latin America. The deal will enable the smaller payments tech company to ramp up expansion efforts in global markets, including the U.S., while PayPal gains entry to the international retail payment terminals business — a market where competitor Square already has a foothold.

That will make for an interesting race — one in which PayPal now seems to have taken the upper hand, thanks to the iZettle deal. And with a valuation of $90 billion, PayPal has a little more weight to throw around than Square, which is worth only $22 billion.

Both companies make a credit card reader that small business owners can plug into a mobile device to accept payments. And both provide additional value-add services like inventory management, capital provision and invoicing. So, who comes out ahead may boil down more to current market positioning combined with ongoing strategic activity.

As things currently stand, Square’s payments dongle is available to brick-and-mortar merchants in just four markets outside the U.S.: Australia, Canada, Japan and the U.K. Meanwhile, iZettle predicts its equivalent product will process $6 billion in transactions this year across northern Europe and Latin American markets. Notch one for PayPal.

Square has just begun its push into eCommerce, acquiring website-building service Weebly for $365 million earlier this month. PayPal, on the other hand, already has a global reach — that’s at the core of its value proposition. Across the 200 countries where it operates, the platform supports 25 currencies. Notch another one for PayPal.

Of course, this early in the game, it could still be anyone’s race — and the winner may not even be one of these two companies. Analysts note that acquisitions across the traditional merchant processing world have lately focused on integrated payment solutions like iZettle’s.

TheStreet predicts payments providers like Worldpay Inc., Global Payments Inc., First Data Corp. and Total System Services Inc. will be looking for services to add to their offerings, which could lead to acquisitions of smaller tech companies similar to iZettle: ShopKeep, Bindo Labs and Adyen, which is reportedly considering an IPO, just to name a few.

Things could get really interesting if Amazon throws its hat into the ring. Right now, the eCommerce giant remains a wild card. We know that it wants to have a go at mobile payments, but what that will actually look like, only time will tell.

PayPal’s Schulman, however, doesn’t seem too worried.

“The world is digitizing,” Schulman told TheStreet in a recent episode of its Jolt podcast. “We are in the very, very early innings of this move towards digital payments. As we look at the digital payments world, we think of it as a $100 trillion market. We think we maybe have captured 1 percent of that market share, maybe even less.”

“This is a rising tide,” Schulman concluded. “There will be a lot of players in this, and it’s definitely not a zero-sum game. There is just not one company that will dominate digital payments.”

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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.

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