PayPal's $2.2 billion takeover of Swedish mobile payments firm iZettle could lead to higher prices and worse service for UK customers, a Competition and Markets Authority (CMA) investigation has found.
PayPal closed its acquisition of iZettle in September, combining the UK's two largest suppliers of mobile point-of-sale devices.
After completing its Phase 1 investigation, the CMA says PayPal "could face insufficient competition in the UK after acquiring its market-leading rival".
Customers, including the SMEs which use both companies' mPOS offerings, could end up paying higher prices or receiving a "lower quality of service".
In addition, the CMA says that had iZettle remained independent "it could have provided strong competition for PayPal and potentially benefitted customers by driving future innovation and lower prices".
Andrea Gomes da Silva, executive director, CMA, says: "While iZettle is a relatively recent entrant to payment services, it has already established a market-leading position in mobile point of sale devices and was well-placed to compete against PayPal in other emerging markets."
If PayPal and iZettle fail to address the CMAs concerns, the watchdog will initiate an in-depth Phase 2 investigation.