• 7 hours NATO Hits Up Startups For Tech Evolution
  • 10 hours Italy’s Budget Defiance Sends Bond Yields Soaring
  • 13 hours Iran Turns To Crypto As SWIFT Cuts Off Central Bank
  • 15 hours Chinese Gold Demand On The Rise
  • 1 day IMF Calls On Central Banks To Consider State-Backed Crypto
  • 1 day Why Are Wall Street Banks Fighting Over Gamers?
  • 2 days An Army Of ‘Verified’ Twitter Accounts Is Promoting Bitcoin Scams
  • 2 days New A.I. Virtual Assistant Gives Traders An Edge
  • 2 days How To Play The 5G Revolution
  • 2 days China’s “Singles’ Day” Sees $31 Billion In Sales
  • 3 days Can Big Oil Save Brazil From Its Crushing Debt?
  • 3 days IBM Launchs Global Payments System With New Stablecoin
  • 3 days Trump Lashes Out As Stocks Slip
  • 3 days Dollar Rally Drags Down Commodities
  • 4 days 5 Signs Pointing To A Gold Rally
  • 4 days Low Oil Prices Weigh On Stock Market
  • 4 days Virtual Reality Real Estate Could Become A Billion Dollar Business
  • 5 days Why Is Wall Street Giving Dating Apps The Cold Shoulder?
  • 6 days Mexico Moves To Legalize Recreational Marijuana
  • 7 days New Attorney General Tied To “American Dream” Scam
Saudi Stocks Plummet As Foreign Investors Bail

Saudi Stocks Plummet As Foreign Investors Bail

The death of journalist Jamal…

EU Weighs New Payment System With Iran To Skirt U.S. Sanctions

EU Weighs New Payment System With Iran To Skirt U.S. Sanctions

Demonstrating its eagerness to continue…

Michael Scott

Michael Scott

Writer, Safehaven.com

Michael Scott majored in International Business at San Francisco State University and University of Economics, Prague. He is now working as a news editor for…

Contact Author

  1. Home
  2. Markets
  3. Other

PayPal’s Latest Acquisition Has Competitors On Edge

City

PayPal’s confirmation yesterday that it will acquire Swedish tech company iZettle for $2.2 billion should be cause for concern for Square, because this acquisition gives PayPal more expansion potential and raises the bar for competition in the lucrative global payments industry.

iZettle--which had only recently said it would go public with an IPO before agreeing to the $2.2-billion acquisition—will be PayPal biggest-ever buy, and the timing is perfect: Square (NYSE:SQ) is gaining serious ground in the mobile payments industry after having started out helping small businesses and food-truck vendors enable credit card and mobile transactions.

The Swedish company has its own mobile-phone hardware for accepting credit card payments and also reaches into software and financing services for small business--and it will help California-based PayPal expand further in both Europe and Latin America.  

The competition is now heating up considerably in this space.

The global, mobile payments industry topped $600 billion in 2016 and is projected to reach $3.3 trillion by 2022 and $4.5 trillion by 2023, growing at a CAGR of 33.8 percent from 2017 to 2023, according to Allied Market Research.

And it’s all about friction.

"Anytime you can remove the friction of the payment we are seeing those companies are getting a nice uplift,” Forbes Peter Olynick told Allied Research.

“If you walk into a retailer and pick up one or two things and there is a line at checkout, you put it down and walk out because don't have the 15 minutes it will take for that queue to open up. When we can get to the point where the payment itself is frictionless, we will get those sales that have been lost. We are very high on the idea that removing that friction, such as Uber, or just making it easier and a little bit faster to get through the line, all those things are going to make it be positive to the retailers who do it best."

PayPal understands the important of reducing the friction, and iZettle should help it do just that.

“Small businesses increasingly want a full suite of capabilities across channels, a one-stop stop,” PayPal CEO Dan Schulman told Forbes. “IZettle was the perfect fit in many ways.” Related: Walmart’s E-Commerce Rebound Fails To Boost Stock Price

iZettle also sees the benefit, with founder Jacob de Geer telling Forbes that he changed his mind about the IPO after meeting with PayPal, which convinced him that the Swedish company could continue to grow significantly through the acquisitions—and that he would continue to lead it. 

So what should we expect? According to PayPal and iZettle, the deal—which should close in Q3—we should expect gross revenue of around $165 million in 2018 through the processing of $6 billion in payments on the platform.

In the meantime, as PayPal views its deal with iZettle as the creation of a force that is different from any other mobile payment offering out there, where does that leave Square?

Square also markets it payment products to small businesses, but oddly enough, just the day after PayPal and iZettle announced their merger, Square’s share prices have erased the 3-percent loss they suffered at the time the acquisition hit the news.

PayPal might have hit on something big with iZettle, but that doesn’t remove Square from this game at all. Some might even argue that it was a defensive move rather than an offensive one on the part of PayPal.

Related: Japan Threatens U.S. With $400M In Tariffs

After all, Square was quickly moving in on PayPal’s Venmo mobile payment service as the Square Cash app has been increasing at a faster rate.

According to a Nomura Instinet report carried by Barron’s, monthly downloads of Square Cash have been taking place at a faster pace than Venmo downloads, which have seen their lead shrink from around 5 million in the middle of last year to around 1 million since July. This is partly because of Square’s bold move to enable bitcoin buying and selling on its platform.

By Michael Scott for Safehaven.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment