uploads///

PayPal Sends Powerful Message to Square with iZettle Deal

By

May. 31 2018, Updated 3:15 p.m. ET

Transaction revenue grew 30% at Square

PayPal (PYPL) and Square (SQ) are increasingly competing on multiple fronts, from processing payments for merchants and consumers to supplying loans to their customers. Both companies aim to be global one-stop solutions for finance services, although at each other’s expense. Point-of-sale (or POS) is one payment vertical where there is intense competition between PayPal and Square.

Although PayPal has cut deals with banks and card networks such as Visa (V) and Mastercard (MA) to expand its POS presence, it hasn’t succeeded in slowing down Square’s penetration of the POS payment market. Square’s transaction-based revenue grew 30% YoY (year-over-year) in the first quarter. Through its square-shaped dongles, Square enables nearly every trader to accept card-based payments, thus ensuring that a merchant doesn’t miss a sale.

Article continues below advertisement

PayPal getting new merchant tools to take on Square

But Square could soon face an emboldened PayPal in the POS payment market. PayPal is acquiring iZettle, a POS payment processor that also makes card readers that allow merchants to accept card-based payments.

IZettle operates in 12 markets in Europe and Latin America, serving nearly half a million merchants. The acquisition of iZettle is expected to not only give PayPal a greater POS presence with more merchant tools but also increase its geographic reach. PayPal currently has a limited in-store presence in markets such as Sweden, Italy, Norway, Brazil, and Mexico.

PayPal’s revenue rose 24%

PayPal’s revenue increased 24% YoY to $3.7 billion in the first quarter. That compares to a 45% YoY revenue increase for Square and a 43% YoY revenue increase for Amazon (AMZN) in the same period.

Advertisement

More From Market Realist