Zettle’s US debut gets PayPal deeper into in-store payments

The news: PayPal launched Zettle, its small-business-centric point-of-sale (POS) solution, in the US. PayPal acquired Zettle (previously known as iZettle) in 2018 for a massive $2.2 billion. At the time, the Sweden-based startup had 500,000 merchants and operated in 12 countries throughout Latin America and Europe, where much of its business still exists today.

What this means: Zettle’s US launch pushes PayPal further into lucrative spaces.

• It’s another opportunity to court small businesses. In 2019, there were roughly 30.7 million small businesses in the US, making up 99.9% of all US businesses—a massive market that PayPal hopes to push further into. Although it’s already involved in the space, it can use Zettle’s tech—like its card reader machine—to push further into the market now that many small businesses are looking to upgrade their POS with digital payment solutions. Pressing into the small-business space can help sustain PayPal’s revenue growth, which in Q1 hit 29% annually on a constant currency basis.
• PayPal wants to move further into in-store payments. PayPal likely sees a growth opportunity in the in-store payments market, especially now that US consumers are heading back to physical stores as pandemic conditions improve: US in-store payments are projected to resume positive growth this year and hit a market value of $5.621 trillion, according to Insider Intelligence forecasts. Zettle’s POS payments hardware can help build out PayPal’s existing in-store capabilities—like its QR code payments tech—to give small businesses more robust transaction solutions.

Stiff competition: PayPal needs Zettle to stand out from other in-store payment solutions. Square, Fiserv’s Clover, and Stripe all have similar in-store and small-business payment capabilities, which may complicate Zettle’s success. But Zettle has PayPal’s backing—along with its various business tools and integrations—so businesses might be more likely to opt for it instead: They’d be able to bundle Zettle’s POS solutions with PayPal’s existing merchant solutions, which are interoperable—making PayPal a one-stop shop for all their business needs.

The bigger picture: Zettle’s US launch comes as PayPal works aggressively to expand: The company has entered new sectors like cryptocurrencies and buy now, pay later and has also built out existing solutions in the payment and retail spaces. The Zettle launch could further these ambitions and help it get even closer to super app status—something PayPal CEO Dan Schulman envisions for the firm.