The UK’s Competition and Markets Authority (CMA) has cleared the $2.2bn (£1.74bn) PayPal-iZettle deal after conducting an in-depth, phase 2 investigation.
Image: PayPal’s headquarters in San Jose, California. Photo: Courtesy of PayPal.
PayPal announced the acquisition of iZettle, a Swedish company offering payments technology, in May 2018. The deal was closed in September 2018.
At the time of closing of the acquisition, the two companies stated that they will operate separately after the CMA initiated a review of the transaction.
The two companies are offering mobile point of sale (mPOS) devices, enabling businesses to take ‘offline’ payments through a card reader connected to a smartphone or tablet.
They are also active in the emerging market for ‘omni-channel’ payment services, which allows businesses to take ‘offline’ and ‘online’ payments through a single provider.
In the Phase 1 investigation, the CMA raised concerns that the deal could reduce competition in the supply of mPOS devices in the UK, which led to a comprehensive Phase 2 investigation.
In April 2019, the UK watchdog had given a provisional clearance for the PayPal-iZettle deal.
In its investigation, CMA found that although iZettle and PayPayl are the two main suppliers of mPOS devices, their customers are willing to change to ‘traditional’ POS devices, if PayPal or iZettle were to increase the prices.
CMA also found that Worldpay and Barclaycard are the two of the largest suppliers of payment services for small merchants and hold nearly 60% of market share and are expected to restrict the merged company in the future.
The merged company could also face competition from other mPOS-only suppliers such as Square and SumUp, which have both grown significantly in the recent years.
In its investigation, CMA also found that iZettle would not have been in a position to expand rapidly in the UK, without the merger. The firm was planning to raise funds through IPO.
PayPal is an online payments system that supports online money transfers and serves, while iZettle is a provider of various payment and commerce solutions, including payments, POS, funding and partners applications.