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What does PayPal-iZettle merger deal approval mean for SMBs?

By Sasha Fedorenko May 9, 2019 - 12:55 pm

The PayPal-iZettle merger has been approved by The Competition and Markets Authority (CMA) after halting the deal by launching an investigation over the union’s possible impact on the imbalance of prices and quality of services for small medium-sized businesses (SMBs).

The CMA concluded that the duo would still face “significant competition” from payments rivals such as Worldpay and Square.

In 2018, the CMA launched an investigation into PayPal’s $2.2bn (£1.73bn) acquisition of the Swedish mobile payments business. It claimed that PayPal “could face insufficient competition in the UK after acquiring its market-leading rival.” The probe soon followed by the second phase which alleged that the merger would bring “a substantial lessening of competition for goods and services” for SMBs.

According to the report, the CMA provisionally approved the merger. The watchdog said that the deal “has not resulted, and is not expected to result, in a substantial lessening of competition in the UK.”

On Tuesday, it said that the new payments players such as Square and SumUp saw significant growth in recent years, presenting competition to the merger deal.

We are pleased the CMA has provisionally cleared our transaction. We look forward to adding iZettle’s products and services to our platform to help small businesses access even more affordable tools to run their shops and compete against the retail giants.”
– Dan Schulman, chief executive officer, PayPal

What are the benefits of the merger for SMBs?

In the phase one decision, the CMA found that expanding their omnichannel payments services capabilities to SMBs is a strategic priority for PayPal. This had been identified as part of the rationale for the merger.

PayPal said that the acquisition aimed to combine two complementary product offerings and geographies to support SMBs’ growth. The deal focused on delivering a “powerful integrated commerce platform” for SMBs “to help them grow and manage their business.” This came as a result of SMBs demand for integrated commerce solutions across all channels including in-store, online and mobile and value-added services to expand such as marketing services, business management tools and working capital solutions.

The global scale and 19 million merchant relationships that PayPal has enables us to move faster and reach further than ever before. Combined with the iZettle brand, capabilities and talent this means we’re ready to level the playing field for small businesses all around the world.”
– Jacob de Geer, chief executive officer, iZettle

The CMA is expected to deliver a final decision on PayPal-iZettle merger in June.

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