PayPal has agreed to acquire iZettle, a Swedish mobile payments firm which enables small businesses to process card payments, for $2.2bn (£1.6bn).

The acquisition – PayPal’s largest ever – will expand PayPal’s in-store presence, enabling it to reach small businesses around the world through its merchant services offering. iZettle will become the European centre of excellence for PayPal’s in-store product and services offerings.

“Small businesses are the engine of the global economy and we are continuing to expand our platform to help them compete and win online, in-store and via mobile,” said Dan Schulman, president and CEO at PayPal. “iZettle and PayPal are a strategic fit, with a shared mission, values and culture – and complementary product offerings and geographies.

“In todays digital world, consumers want to be able to buy when, where and how they want. With nearly half a million merchants on their platform, [iZettle CEO] Jacob de Geer and his team add best-in-class capabilities and talent that will expand PayPals market opportunity to be a global one-stop solution for omnichannel commerce.”

The deal is expected to close in the third quarter of this year – at which point PayPal will gain in-store capabilities in Brazil, Denmark, Finland, France, Germany, Italy, Mexico, Netherlands, Norway, Spain, and Sweden, while accelerating its omnichannel commerce solutions in Australia, UK, and US.

De Geer will continue to lead iZettle, reporting to PayPal’s COO Bill Ready, and will be joined by the rest of the iZettle management team.

“Combining our assets and expertise with a global industry leader like PayPal allows us to deliver even more value to small businesses to help them succeed in a world of giants,” said De Geer. “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.”