Digital payments giant PayPal is to swallow up Swedish financial technology start-up iZetttle for $2.2bn (£1.6bn).

The announcement came after Sky News revealed that the two companies were in advanced talks.

It marks the largest ever acquisition by California-based PayPal, which was spun out of eBay in 2015.

The price being paid by PayPal – itself valued at more than $90bn (£66bn) – is double the valuation that iZettle was reported to be seeking from a listing on Nasdaq Stockholm.

iZettle is best known for offering small businesses a mini credit card reader that can turn smartphones and tablets into payment registers.

It has a presence in 11 countries including Brazil and Mexico as well as across Europe – with its brand increasingly familiar in British coffee shops and restaurants.

iZettle has nearly half a million merchants on its platform and expects to generate gross revenues of $165m (£122m) in 2018, processing total payments of around $6bn (£4.4bn).

Image: iZettle is best known for offering small businesses mini credit card readers

Announcing the takeover, the companies said that by joining forces with PayPal, iZettle would be able to accelerate its international expansion including to the US.

Jacob de Geer, iZettle's chief executive, said the deal would "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".

PayPal boss Dan Schulman said: "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."

He said the tie-up with iZettle was a "strategic fit".

The deal underlines the fast-changing nature of the world's digital payments sector.

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In the UK, FTSE 100 payments group Worldpay was acquired last year by America's Vantiv.

Nasdaq-listed PayPal is a giant in the sector, disclosing in first quarter results last month that it processed $49bn (£36.3bn) in mobile payments during the three months to 31 March.

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