PayPal takeover of iZettle could lead to higher prices for UK customers, watchdog warns

The CMA said customers could face lower quality service due to a lack of competition now that PayPal has bought its rival

The $2.2bn takeover could also lead to lower-quality service, says the CMA (Getty)

PayPal’s $2.2bn (£1.7bn) takeover of Swedish payments firm iZettle has raised competition concerns, the UK watchdog said on Monday.

Following an investigation, the Competition and Markets Authority (CMA) said it had found that PayPal “could face insufficient competition in the UK after acquiring its market-leading rival”.

The CMA also said its findings “raise concerns that the merger could result in customers, which include small and medium-sized businesses, paying higher prices or receiving a lower-quality service”.

PayPal completed its acquisition of the Swedish company in September, and the CMA began its probe of the deal in October.

If PayPal and iZettle cannot address the regulator’s concerns, the merger will be referred for an indepth investigation.

Andrea Gomes da Silva, CMA executive director, said: “Payment services markets are evolving, so it’s particularly important to look to the future when we assess competition and the effects of mergers on customers.

“While iZettle is a relatively recent entrant to payment services, it has already established a market-leading position in mobile point-of-sale devices and was well placed to compete against PayPal in other emerging markets.

“That’s why we are concerned that PayPal’s takeover could lead to higher prices or reduce the quality of the services available to customers.”

A PayPal spokesperson said, “PayPal continues to work cooperatively with the CMA as it conducts its review of the acquisition of iZettle. We are now working to address the CMA’s concerns and demonstrate to the CMA that the market will remain competitive, so we can move forward with integrating iZettle into our global platform.”

Mike Cherry, national chairman of the Federation of Small Businesses, said: “The fees that small firms incur when processing card payments can cause a real drag on profits and lead to higher prices for customers – particularly as businesses are no longer allowed to charge for card use. This is especially the case for firms that handle a lot of low value transactions: coffee shops, barbers, convenience stores.

“The CMA is absolutely right to scrutinise this potential acquisition on behalf of smaller businesses. It’s vital that – if completed – the merger doesn’t lead to even higher prices for card processing services or stifle much-needed innovation.”