Retail IoT: PayPal acquires iZettle for $2.2 billion
Jacob de Geer, iZettle CEO

Retail IoT: PayPal acquires iZettle for $2.2 billion

PayPal has announced that it is to acquire European fintech player, iZettle, for $2.2 billion, in a move that will draw the online payments giant further out of the world of clicks and deeper into bricks-and-mortar retailing.

PayPal stepped in to acquire the company just 10 days after iZettle announced that it planned to go for IPO.

iZettle’s electronic payment devices enable nearly half a million European enterprises to accept payment by credit and debit cards.

PayPal’s goal is to use the acquisition to provide a more comprehensive digital payments offering to retailers that want to explore omnichannel strategies by selling products across a range of bricks and clicks platforms.

“Helping small businesses compete with the giants in the market really resonated for both of us,” said PayPal chief, Daniel Schulman, referring to Amazon, Walmart, Alibaba, and other connected retail behemoths.

Big money: good idea?

The acquisition is the largest in PayPal’s history and sets it in direct competition with Square Inc, which has focused on enabling digital payments for millions of small businesses.

This was undoubtedly a factor in iZettle’s decision to sell rather than go public: too many cooks in the market kitchen, not to mention a lot of debt to pay back to its own investors.

However, the $2.2 billion price tag is twice what analyst consensus predicted would be iZettle’s valuation post IPO, eight times the sum it hoped to raise by going public, and 13 times the size of its projected 2018 revenues.

Whether PayPal has paid over the odds must be the key question, therefore, and suggests that it is feeling the heat from increased competition in the digital payments and retail sectors, not to mention from losing its exclusive relationship with eBay.

“By joining the PayPal family, we’ll become iZettle with superpowers and jump on a fast track to realise our vision,” said iZettle CEO, Jacob de Geer, announcing the deal.

“The opportunity to become part of PayPal was too good to pass up. Not only because of what it means for iZettle and for iZettle’s employees, but also because of what we can offer to our merchants.”

De Geer will continue to lead the business, but will report PayPal COO, Bill Ready.

Internet of Business says

Competition is certainly hotting up in the digital retail and payments spaces.

Alongside Amazon, Walmart, and Alibaba’s cross-market ambitions and successes, Square has taken the fight to PayPal in recent months, with the launch of smartphone app Square Cash for online purchases and money transfers. Despite this, PayPal processed $132 billion of payments in the first quarter of 2018, seven times more than Square did over the same period.

However, Square Cash is increasingly being used in place of a traditional bank account, according to CEO Jack Dorsey, with its moves into supporting cryptocurrencies also proving popular among the app’s seven million users.

Meanwhile, MasterCard is behind a number of new retail systems that allow customers to pay for baskets of goods via their smartphones, avoiding checkout queues. The Co-op is among the retailers trialling the technology.

However, how PayPal and iZettle will manage the merger of their technology platforms remains a key challenge, with many previous mega-deals serving to prove that acquiring customers and market presence often comes at the expense of technology integration.