Why iZettle’s exit strategy u-turn is so disappointing
Sarah Kocianski
Head of Competitor Strategy
When news broke a week or so ago that, Swedish payment fintech, iZettle planned to IPO this year, I pondered whether it would be the first of a flood of European fintech IPOs. We now know it won’t.
iZettle is being acquired by US payments behemoth PayPal for $2.2 billion, double the amount iZettle was hoping to raise in its IPO.
They will have wanted to learn from iZettle’s experience and use it to get a temperature read of the markets. That’s not to say they won’t go ahead with their own public offerings. The likes of Funding Circle and Adyen have most likely already poured considerable resources into prepping for an IPO. Unless they get irresistible offers of their own, it seems probable they will still list soon. Whether other fintechs working out their own exit strategies will follow suit remains to be seen.
iZettle is already one of the biggest players in Europe and also has footholds in Mexico and Brazil. Its range of products and services; from point of sale (POS) hardware and software specialised for sole traders or those in the hospitality trade, through to ecommerce packages, and loans, is not matched by any of its competitors. With the added resources that iZettle will now have access to, its reach will only grow, which will likely spell trouble for smaller players. Many of whom will be pushed out of the market.
The fact that iZettle sold itself to a larger, US-based firm, following a trend seen elsewhere in tech (e.g. Skype selling itself to Microsoft) will be disappointing to those looking for more competition in the global market. There is an appetite among European investors, regulators and customers, both consumer and business, for some more “homegrown” options in the tech and finance space. That’s becoming more pronounced as US-based companies like Facebook, Equifax, and Yahoo make serious mistakes that further dent customer confidence.
iZettle’s Swedish headquarters will become a “centre of excellence for PayPal’s in-store product”. To date PayPal has struggled to gain a foothold in the in-store market, an area where iZettle has built a market leading ecosystem of products, so from a strategic perspective this decision makes sense. iZettle on the other hand will get access to PayPal’s network of 19 million merchants. The two will also work together to expand their geographical footprint which will most likely mean pushing further into Latin America for a start. Given how their offerings complement each other, the acquisition makes a lot of sense for both PayPal and iZettle. But, for the broader European fintech market, and to European customers, it’s a disappointing development. All eyes will now turn to Funding Circle and Adyen to see if they will break the mould when it comes to European fintech exits. Sarah is a Principal Analyst at 11:FS and regularly hosts Fintech Insider and Insurtech Insider. Follow her on Twitter @SarahKocianski or email her at sarah.kocianski@11fs.com
As you might have heard, we were preparing the company for a potential IPO. But plans sometimes change. - Jacob de Geer, CEO and co-founder, iZettle
So what does that mean for European fintech?
For other European fintechs preparing for IPO it will be disappointing.
They will have wanted to learn from iZettle’s experience and use it to get a temperature read of the markets. That’s not to say they won’t go ahead with their own public offerings. The likes of Funding Circle and Adyen have most likely already poured considerable resources into prepping for an IPO. Unless they get irresistible offers of their own, it seems probable they will still list soon. Whether other fintechs working out their own exit strategies will follow suit remains to be seen.
Fintechs in the global payments space will be concerned.
iZettle is already one of the biggest players in Europe and also has footholds in Mexico and Brazil. Its range of products and services; from point of sale (POS) hardware and software specialised for sole traders or those in the hospitality trade, through to ecommerce packages, and loans, is not matched by any of its competitors. With the added resources that iZettle will now have access to, its reach will only grow, which will likely spell trouble for smaller players. Many of whom will be pushed out of the market.
These two factors combined will give the broader European fintech industry food for thought.
The fact that iZettle sold itself to a larger, US-based firm, following a trend seen elsewhere in tech (e.g. Skype selling itself to Microsoft) will be disappointing to those looking for more competition in the global market. There is an appetite among European investors, regulators and customers, both consumer and business, for some more “homegrown” options in the tech and finance space. That’s becoming more pronounced as US-based companies like Facebook, Equifax, and Yahoo make serious mistakes that further dent customer confidence.
What next?
iZettle’s Swedish headquarters will become a “centre of excellence for PayPal’s in-store product”. To date PayPal has struggled to gain a foothold in the in-store market, an area where iZettle has built a market leading ecosystem of products, so from a strategic perspective this decision makes sense. iZettle on the other hand will get access to PayPal’s network of 19 million merchants. The two will also work together to expand their geographical footprint which will most likely mean pushing further into Latin America for a start. Given how their offerings complement each other, the acquisition makes a lot of sense for both PayPal and iZettle. But, for the broader European fintech market, and to European customers, it’s a disappointing development. All eyes will now turn to Funding Circle and Adyen to see if they will break the mould when it comes to European fintech exits. Sarah is a Principal Analyst at 11:FS and regularly hosts Fintech Insider and Insurtech Insider. Follow her on Twitter @SarahKocianski or email her at sarah.kocianski@11fs.com