iZettle is best known for offering small businesses a mini credit card reader that can turn smartphones and tablets into payment registers, akin to that offered by US-based Square Inc, the company founded by Twitter Chief Executive Officer Jack Dorsey.
iZettle, which is based in Sweden, said last week it would list an IPO on the Nasdaq in Stockholm sometime this year, and said at the time it would not be pursuing a sale as alternative to an IPO.
Since Paypal now does not have a strong offline presence in these markets, it will look to leverage on iZettle to penetrate into these markets.
iZettle, headquartered in Stockholm, is present in 11 countries, including Brazil, and offers other services to small businesses as loans.
It was unclear on Thursday night whether Mr de Geer and his senior colleagues would remain with the business if a takeover by PayPal does go ahead, although sources indicated that they would be likely to.
By joining forces with PayPal, which operates in 200 countries, iZettle will be able to accelerate its global expansion, including to the United States, the companies said.
Both PayPal and Square are vying to help mostly small- and medium-sized retailers process sales that aren't paid with cash.
It would be the largest ever deal for PayPal, Bloomberg reported.
The deal will also help PayPal provide a more comprehensive suite of services to its merchants.
IZettle expects to generate gross revenues of approximately $165 million Dollars in 2018, with approximately $6 billion USD of total payment volume (TPV) expected to be processed on its platform.
The transaction is expected to be approximately $0.01 dilutive to PayPal's previously communicated full year 2018 non-GAAP EPS.
PayPal hopes the transaction will close in the third quarter, the company announced. The two companies will continue to operate independently until close.