iZettle buys firm that turns iPads into sales terminals as rival Square eyes Europe

Swedish payments start-up iZettle, a rival to U.S.-based Square, has acquired Intelligentpos a start-up that turns iPads into sales terminals.

iZettle makes card readers that can attach to smartphones and tablets in order for small merchants to process payments. It does not charge for the devices but only takes a cut of the transaction - between between 1 percent and 2.75 percent -- depending how much the business the trader does.

But now the company wants to target a new area of growth – larger businesses with about 10 to 15 employees, rather than the sole trader running a coffee shop for example, and this is where it hopes Intelligentpos will help.

Intelligentpos turns an iPad into a point of sales (POS) solution. The company has been working with iZettle for the last two years to integrate the Swedish firm's card readers with its POS software. So when people buy Intelligentpos's software, they can accept payments via iZettle's card terminal.

Johan Jeppsson | Bloomberg | Getty Images

Jacob de Geer, chief executive of iZettle, said takeover talks had been ongoing for 12 months and finally came to fruition this month.

"With this acquisition, we move away from the typical owner-operated business to the bigger business where you have up to 10 or 15 employees. Moving up to small businesses is incredibly exciting," de Geer told CNBC in an interview ahead of the announcement.

iZettle did not say how much it paid for the company.

Intelligentpos is a nearly four-year-old start-up based in Edinburgh, Scotland, and says it has thousands of customers, mainly U.K.-based, and transacts about 500 million euros ($558 million) through its system every year. The start-up will remain based from Edinburgh and chief executive Robin Knox told CNBC the company will "continue operating as an independent unit" within iZettle.

Is the mobile payment sector too crowded?

The U.K. is iZettle's biggest market and the acquisition will help it offer a new service across the 12 coutnries it operates in. The Swedish start-up, which is reportedly valued at around $500 million after a 60 million euro funding round last year, is the market leader in Europe, transacting about 3 billion euros this year.

Square threat?

iZettle's acquisition also comes at a time when it faces potentially heightened competition from U.S. rivals such as Square, the payments firm run by Twitter chief executive Jack Dorsey. Square incorporated a business called Squareup Europe Ltd in Britain recently where its technology is being used currently. The company also posted new job openings in Europe online hinting at an increasing presence in the region.

However, de Geer said the acquisition was not fuelled by an attempt to protect the business from competition, as the deal was 12 months in the making adding that iZettle was the incumbent and knows the European markets better than U.S. competitors.

"With this acquisition, I think we are extremely well-positioned in the U.K. and other markets because what we see here with this, we are far more advanced than any of our competitors," de Geer told CNBC.