What's going on?
On Friday, American payments giant PayPal opened up its checkbook to acquire Swedish mobile payments company iZettle for $2.2 billion – the most PayPal’s ever spent in a single deal.
What does this mean?
iZettle’s mobile readers help small and medium sized businesses to process credit and debit card payments – while PayPal’s business is still largely focused on online transactions. After announcing in February that it would no longer be working with long term partner eBay, PayPal’s been looking for new ways to convince shoppers to open their wallets.
Paypal hopes acquiring iZettle will help it to grow in new places by providing it with a foot in the door at brick and mortar stores.
Why should I care?
For markets: Investors are optimistic PayPal can stand alone.
Following PayPal’s spin-off from eBay in 2015 (in which it emancipated itself from its parent company) and February’s announcement, PayPal’s shares had begun to falter. But the stock jumped by 2% on Friday’s news as investors likely hoped iZettle’s presence in eleven markets would help supercharge PayPal’s future growth.
The bigger picture: Payments is a big, bad business and its only getting tougher.
The desire for retailers to have a “one stop shop” payments provider for all their stores (i.e. online and physical) is growing because of ecommerce’s continued ascent – and PayPal knows that. This may make it harder for smaller players to compete when deep pocketed competitors can invest heavily to boost their armory – like Vantiv buying Worldpay – one of the world’s biggest payment technology companies – for a mammoth $10 billion.