The Competition and Markets Authority (CMA) has given provisional approval to Paypal’s $2.2 billion takeover of Swedish mobile payments company iZettle.

In November an investigation by the UK competition watchdog had raised concerns that the proposed merger could drive up prices for customers and lead to a more limited range of services.

The CMA had also been concerned about the potential impact of the merger in omni-channel payment services, where PayPal has already established a strong position and iZettle had been expanding its presence amongst mainly small and medium-sized businesses.

However, following an in-depth Phase 2 probe, including a survey of 6,000 customers, the CMA provisionally cleared the online payments giant to go ahead with its plans to take over the mobile point of sale (mPoS) device vendor.

The investigation revealed that, while iZettle and PayPal are two of the largest suppliers of mPoS devices, their customers are also willing to switch to ‘traditional’ PoS devices.

The two largest suppliers of payment services to smaller merchants, Worldpay and Barclaycard, account for almost 60 per cent of the market at present and will continue to constrain the merged company.

The merged company will also be likely to face significant competition from other mPoS-only players, such as Square and SumUp, which have both grown significantly in recent years, the CMA said.

Kirstin Baker, the inquiry chair for the CMA, said: “The payment services sector is dynamic, and our in-depth investigation has enabled us to carry out a large amount of further analysis about how competition is likely to develop in future.

“As iZettle is a relatively recent entrant to payment services, and PayPal had pre-existing plans to invest in its product offering, it has been particularly important for us to verify in detail what could have happened had iZettle not been taken over,” she continued.

“While iZettle and PayPal are two of the main suppliers of mobile point of service devices, the additional evidence we have analysed indicates that the distinctions between these and ‘traditional’ point of service devices are reducing over time and that large numbers of customers can and do switch to ‘traditional’ point of service devices.”

A final decision on the merger is expected by mid-June after collecting views on the provisional findings and assessing all evidence, the CMA said.

Dan Schulman, president and chief executive, of PayPal said he was pleased the CMA has provisionally cleared the 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,” he added.

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