The UK's competition watchdog has given the green light to PayPal's acquisition of Swedish mobile payments company iZettle following an in-depth investigation.

The Competition and Markets Authority has been investigating the $2.2 billion deal, which completed in September, after raising concerns that PayPal could now face insufficient competition in the UK.

Both companies provide mobile point of sale (mPOS) devices that enable businesses to take ‘offline’ payments through a card reader connected to a smartphone or tablet.

The two companies are also active in the emerging market for ‘omni-channel’ payment services, through which businesses can take ‘offline’ and ‘online’ payments through a single provider.

An initial Phase 1 investigation raised concerns that PayPal’s purchase of its rival might reduce competition in the supply of mPOS devices in the UK. This led to the deal being referred for a comprehensive Phase 2 probe.

The CMA then announced in April that it had provisionally found the deal should be cleared. Having consulted on this provisional finding, the CMA has now confirmed the merger has been cleared.

"I am pleased our acquisition of iZettle has been unconditionally approved," said Dan Schulman, president and CEO, PayPal.

“We believe there is huge potential in giving millions of small businesses access to affordable tools to run their business and look forward to working together with the iZettle team to make this a reality.”

The CMA said the investigation, led by an independent group of panel members, considered in detail how competition between the merging businesses would have been likely to develop in future.

It reviewed extensive evidence relating to PayPal’s rationale for the merger and what the commercial strategies of PayPal and iZettle would have been if the merger had not taken place.

It also considered how customers choose between the more novel mPOS devices, and ‘traditional’ point of sale devices.

This revealed that, while iZettle and PayPal are 2 of the largest suppliers of mPOS devices, their customers are also willing to switch to ‘traditional’ POS devices. The two largest suppliers of payment services to smaller merchants, Worldpay and Barclaycard, account for almost 60 per cent of the market at present, which the CMA said “will continue to constrain the merged company”.

The merged company will also face significant competition from other mPOS-only players, such as Square and SumUp, which have both grown significantly in recent years.