It was founded in Sweden as a provider of credit card readers to small businesses, but has outlined major ambitions to take advantage of the rapid evolution in artificial intelligence and cloud technology in order to develop new products for its customer base.
PayPal already have a card reader, but where iZettle are strong is their in-store expertise, digital marketing strength and mobile point-of-sale technology.
It has since expanded into financing services, with a presence in Brazil, Mexico and Europe.
By joining forces with PayPal, which operates in 200 countries, iZettle will be able to accelerate its worldwide expansion, including to the USA, the companies said. "The combination of iZettle and PayPal will provide tremendous benefits to our merchants who will have access to an even wider range of tools to help them get paid, sell smarter and grow".
As per the deal, the position of iZettle's co-founder and CEO Jacob de Geer will remain intact. iZettle's entire executive team will also continue the operation as before. The company forecast reaching EBITDA profitability by 2020 on a standalone basis.
The tie-up with iZettle will increase PayPal's capacity with firms with physical retail operations.
The transaction, which is expected to be Dollars 0.01 dilutive to PayPal full year adjusted earnings per share, is subject to the usual closing conditions, including regulatory approvals.
Since separating from online marketplace eBay (EBAY.O) in 2015, PayPal has reshaped itself from mostly processing transactions for its parent company online to offering a suite of digital payment services across the world. The completion of this transaction is subject to customary closing conditions, including regulatory approvals. J.P. Morgan Securities plc is acting as sole financial adviser to iZettle, while Gernandt & Danielsson is acting as its legal adviser.