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iZettle gets funded, starts shadow banking

iZettle, the Swedish company that makes card readers for smartphones has just gotten another €60 million (£43.77m) in funding.

The funds were raised from Intel Capital, Zouk Capital and Santander's investment fund InnoVentures.

This funding round, the fourth one in the company’s history, brings iZettle’s value up to €147.4 million (£107.5 million).

What makes it even more interesting is that the company is also moving into a completely new field of operations called shadow banking. Essentially, it’s giving out loans to small businesses, and according to a report by UK’s Business Insider, it’s a “huge and growing field”.

In 2013, the global industry saw a 7 per cent growth, to $75 trillion (£48.7 trillion).

The iZettle Advance service will let customers who use the card reader borrow money against projected future revenues.

de Geer tells Business Insider: "It’s a pretty logical next step. We have deep integration with our customers’ data and we’ve got a good idea how much they’re processing every month or year. We’ve seen from the beta test we’ve been running for the last few months that we can reduce the risk quite a lot."

Unlike traditional loans, iZettle's won't carry interest, nor have a set repayment date. The company will charge a fixed fee and the loan will be paid back by increasing the fee taken on future transactions using the terminal. That fee will vary depending on how business is — so customers will pay back more when they're doing well.

"It’s simple, it’s transparent, and in my opinion it's very honest. It’s not trying to lock you into a strange agreement."