KBW: Mobile Payments Leader PayPal’s iZettle Issues Go to Phase 2 Investigation

Not long ago, we brought out word about the United Kingdom’s Competition and Markets Authority (CMA), who had some concerns about the issues PayPal’s acquisition of iZettle might raise in the region in terms of customers paying more for services or otherwise losing access to competition. The folks out at Keefe, Bruyette & Woods (KBW) tipped us off about new developments on that front, revealing that the investigation is poised to carry on to a Phase 2 investigation.

Originally, PayPal could have submitted proposals that might have mitigated the need for a Phase 2 investigation, offering some insight into how the move wouldn’t impact competition or prices in the region much, if at all.

The report from KBW, however, says that PayPal and iZettle kept entirely mum on such proposals, which pretty much set the stage for the Phase 2 investigation to kick in. Further reports suggest that PayPal’s plan is for the CMA to basically conduct its investigation, and ultimately find nothing of consequence.

KBW, meanwhile, notes that such a move does inject uncertainty into the proceedings, but PayPal’s sheer confidence going into the whole matter suggests that the outcome is likely to emerge as PayPal expects.

After all, if PayPal were concerned, they would have offered the strategies as earlier noted. Better yet for PayPal, an analysis of previous Phase 2 investigations conducted by the CMA end with the company targeted cleared unconditionally, so not only does PayPal have its own perspective on its side, it also has the odds in its favor as well.

It’s a safe conclusion that PayPal will come out on the other side of this well. The odds, the overall lack of concern on PayPal’s part…these speak to a company that’s ready to get on with business once the regulators finish marking their territory. Sure, there’s a potential that this will prove the exception that proves the rule, but in all likelihood—especially given the predominance of mobile payments options in the UK already—PayPal’s operation of iZettle for point of sale systems likely won’t hurt UK retailers’ ability to find other point of sale tools.

PayPal’s confidence here likely isn’t misplaced, and the investigations should make that clear in the coming weeks.