Mobile payment platform iZettle launches in Germany, backed by Deutsche Telekom and VR-Banks

iZettle
iZettle

Is mobile payment the new boom market? If you look at how ambitious providers such as Square, Payleven, SumUp and Streetpay are, it’s not hard to tell that the expectations are high in the market. And now iZettle, the biggest European provider, is launching in Germany – scoring not only Deutsche Telekom but also the German commercial credit co-operatives (the Volksbanken and Raiffeisenbanken) as cooperative partners.

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iZettle launches, supported by Telekom and VR-Banks

The payment area has for some time been considered one of the most promising segments in eCommerce. In the past few months, particularly in the mobile payment area, a whole row of providers have posititioned themselves to gain access to the relevant markets as quickly as possible.

Swedish-based iZettle, one of the biggest European providers, is now launching in the German market and has won leading partners in the form of the Deutsche Telekom and the DZ Bank (the controlling institute of more than 1100 Volks and Raiffeisenbanks in Germany).

width="250"It was only a few days ago that the business gained their latest financing round – a grand total of €25 million – and, along with Greylock, Northzone, MasterCard and SEB Private Equity, won American Express as a new investor.

With two of the three big credit card providers onboard, founders Jacob de Geer and Magnus Nilsson (here in an interview with VentureVillage) are making no secret of their goals for the German market place: they want to become the leaders in the largest market in Europe. But, they want to do it differently from the rest.

One crucial difference: Chip and PIN

iZettle is the oldest of the European square clones, facing competition from Payleven (from the Rocket Internet stable), SumUp and Streetpay, who all launched this year. Distinguishing themselves from their American role model, iZettle’s smartphone attachment isn’t on the magnet strip on credit cards, but rather on the European-wide EMV chip. But iZetlle has not yet fully matured: at the moment they’re still lacking the option to confirm payment via PIN.

This means that the Swedish system has fallen behind the competition for two reasons: Firstly, without this option they do not fulfill the security standards of credit card supplier Visa, so they miss out on these customers. Secondly, it also means that they lag behind Payleven, the Rocket Internet backed business that already has this function and has begun advertising and expanding internationally.

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Will there soon be 25,000 iZettle users in Germany?

That this flaw will have a significant effect on its acceptance in the marketplace is unlikey, the majority of German credit card payments are traditionally done with EC cards. Considering the fee structures, there is not much separating the providers – iZettle demands 2.75% per transaction, there are no further costs.

Aside from Germany, iZettle is available in Sweden, Norway, Finland and Denmark, while the system is still being tested in the UK. According to the business, the platform has been used by 75,000 small businesses and consumers to date. In the German market, iZettle will be lead by a 10-person team based in Berlin, with the company aiming to gain a further 25,000 users by distributing free card readers.

The competition won’t sleep

But the iZettle competitiors are not resting on their laurels – roughly one month ago, Payleven introduced an API that developers could use to connect their offers to the system, while also launching their product in Italy. At the end of August this year, SumUp launched in Germany, Austria, Great Britain and Ireland, with more countries to follow in the next couple of years. The company definitely has the money to support their expansion, they joined with swiss investment company b-to-v Partners AG, while Shortcut Ventures, Tengelmann Ventures GmbH and business angel Klaus Hommels have all invested in SumUp.

As yet another supplier, Streetpay has already joined with mobile network E-Plus and are competing by sinking their transaction fee to 1.9% – significantly under that of their competition. With Square currently flooded with capital, the two major US suppliers must be taking note of the German market – even if the big moves to expand globally have been left out until now. Just how long it’ll remain this way is questionable.

Translated by Michelle Kuepper

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