Just days after releasing an API to integrate its payment platform into third-party apps, iZettle, known as the “Square of Europe” for its dongle-based iOS mobile payment system, has even more news: it has just completed a €25 million ($31.4 million) Series B round of funding as part of its bid to become the biggest mobile payments platform in the region. The round was led by new investors Greylock Partners and Northzone, with participation from others — including the eye-catching news that payment giant MasterCard is now an investor — along with other new backer SEB Private Equity, and previous investors Index Ventures and Creandum.
The funding takes the total investment in the company to $46.7 million, and Jacob de Geer, iZettle’s co-founder and CEO, says it will be used for product development, and to continue to build out its mobile payments service in Europe — currently available in Scandinavia and trialling in the UK. “Our priority is to get the UK fully launched, and then look at other major markets like Spain, Italy, France and Germany to continue building up our transaction volume,” he told TechCrunch in an interview. “We’re not interested in the U.S. They’re doing really well with Square and others.”
Since starting its first services in its home market of Sweden in August 2011, iZettle has picked up 50,000 merchants using its system — a far smaller number than the 2 million milestone revealed yesterday by Square. But iZettle says that potentially there are 20 million merchants in Europe — that’s the number who currently do not take card payments for their services, putting to one side targeting those who already can — who could be using its service to accept card-based payments.
In its focus on Europe, iZettle is going after a market that has yet to be tackled by PayPal’s Here (although it is looking at other payment routes), or Square (which is reportedly looking to enter Europe itself); but that does have others also looking to do more dongle-based mobile payments: they include mPowa, and a Square clone from the Samwer brothers that may be called PayLeven (that would be its third re-branding and the Samwer’s investment vehicle Rocket Internet has so far declined to comment to TechCrunch about what its strategy is in the venture — we’re asking again now).
iZettle is not disclosing its valuation on the back of the funding news today. Square, by comparison, has raised $141 million to date and has a valuation of $4 billion.
Unlike other dongle-based mobile payment services like Square and PayPal’s Here which use a card’s swipe strip for processing, iZettle has focused on transactions (each charged a flat 2.75% commission on MasterCard, Visa and Diners Club; 3.75 for AmEx) using chips embedded in the cards: chips are now ubiquitous in Europe and are considered more tamper-proof than the strips. De Geer believes that will help the company bring on both more merchants and consumers to the service as it looks to take its offering mass market. “Security comes built into that,” he says.
Its unique IP — an interesting mix of software technology with hardware thrown in — is also what has attracted this latest round of investment.
“iZettle is the first and only company to develop an affordable chip-card reader and app for smartphone-based mobile commerce that meets all of the rigorous international security requirements,” Laurel Bowden, Greylock’s partner in London who is joining iZettle’s board of directors, said in a statement. “They’ve proved they’re ready to step up their game in this very complex and competitive industry.”
The fact that iZettle is based around the chip technology, and that it has a firm commitment to becoming the name synonymous with mobile payments in Europe, makes the company also potentially interesting as either a partner, or even an outright acquisition target, for those larger U.S.-based payment companies that are looking for a way of entering a new market.
De Geer says that the company has already even engaged in those kinds of conversations on a casual basis — but he emphasizes that nothing has advanced into more serious negotiations yet. “It’s not something that we’ve been pursuing actively at this point,” he says.
Aside from building its own user footprint and partnering with other, complementary mobile players, there is another direction that iZettle is likely to explore in the future: the idea of linking up its payments services with other parts of the mobile payment ecosystem, which includes services like product discover, customer loyalty programs, and other rewards services: after all it’s a natural progression to take a consumer from one function to the other, and it makes it much more likely that the consumer will complete transactions if you make it as easy as possible for him to do so.
iZettle has an interesting arrangement that could point to its first partner in such a new venture. It actually shares a Stockholm office with Wrapp, the mobile gift card aggregator that recently entered the U.S. market and has similar ambitions to become the default service of its kind across Europe.
“We are very interested in what Wrapp does in terms of gift cards. They are really disrupting with the gift card market, and that’s all they focus on so that makes them a good partner for what we could do,” says de Geer. “At the end of the day, for all of us, it’s all about adding value for our merchants.”