PayPal’s $2.2 billion acquisition of Swedish small business commerce platform iZettle will boost its presence in 12 markets across European and Latin America, particularly in the physical retail space. The move highlights the increasingly overlapping businesses of PayPal and Square, of which iZettle is a competitor.

Indeed, the announcement negatively impacted Square’s stock, though briefly. Both Square and iZettle target small businesses with their mobile point-of-sale devices, and PayPal has struggled in-store with poorly executed solutions such as its Home Depot integration. The two battle in the P2P space as well. (The mobile POS space is quite active these days — note Visa and Mastercard’s decision to form a single button.)

In a Twitter exchange with Bank Innovation, James Wester, research director of worldwide payment strategies at the consultancy IDC, noted:

This is a big deal. Square has been slow to expand internationally, and this now gives PayPal a sizable chunk of merchants in some important markets. Plus, from the merchant side, if this allows merchants to access PayPal accounts, where PayPal can speed checkout on a mobile device, that would be an attractive offer in an email.

Though it is present in 200 e-commerce markets around the world, San Jose, Calif.-PayPal is only present in the physical retail markets of a few countries, including the U.K., U.S. and Australia, Wester explained. With the acquisition of iZettle, that changes things.

For Stockholm-based iZettle, the decision to be acquired by PayPal comes only weeks after its CEO announced plans for an IPO. According to a report by the Financial Times, the company was seeking to raise funds to bring its valuation to SKr 10 billion ($1.1 billion).

Clearly, PayPal’s $2.2 billion all-cash offer exceeded this expectation, by far. Under the PayPal umbrella, iZettle CEO and co-founder Jacob de Geer will continue leading the iZettle team.

Founded in 2010 by Geer and Magnus Nilsson, iZettle currently has about 500,000 merchants on its platform across 12 countries in Europe and Latin America.

For PayPal, the deal is its largest one by far. In 2015, PayPal acquired international money transfer company Xoom for $890 million, and before that, in 2013, it acquired the payments company Braintree (which had recently acquired the P2P platform Venmo) for $800 million.

In a blogpost yesterday confirming its purchase of iZettle, PayPal CEO Dan Schulman, stated:

Small businesses are the engine of the global economy and they are increasingly demanding a partner that can provide a one-stop solution to help them compete and win online, in-store and via mobile. The combination of PayPal and iZettle brings together iZettle’s in-store expertise, digital marketing strength and mobile point-of-sale technology with PayPal’s global scale, online and mobile payments leadership and trusted brand reputation to support merchants and consumers in more ways.

The deal is expected to close in the third quarter of 2018.

PayPal, which trades on Nasdaq under the ticker symbol PYPL, is trading at $81.45, up 2.9% as of 12 PM ET today. It has a market capitalization of $96.5 billion.