As the payment wars heat up, PayPal could have a leg above Square

PayPal shares rallied on news it plans to acquire Swedish payment company iZettle, and all signs point to this as a smart move.

Even though the price tag is expensive �� a hefty $2.2 billion �� this helps solidify PayPal as end-to-end payments solution as retail shoppers continue moving online and payments are made increasingly on mobile phones.

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This should also put to bed the rumors that PayPal was going to buy Square �� and instead will now be a stiff competitor.

Where PayPal now stands

PayPal is a leader in the move to digital, and more importantly mobile payments, across the globe. It has a technology platform that includes Venmo and other payment services which allow customers and merchants to quickly, easily and safely execute transactions. The company also already has a wide reach, with over 225 million active accounts executing over 2.2 billion transactions per quarter in over 200 countries.

Gaining an edge

IZettle will likely provide small point-of-sale devices that attach to mobile phones to businesses that are offline. It is similar to the U.S.-based Square.

The acquisition will help PayPal expand its point-of-sale business in the small and medium business market, and gives PayPal exposure to some additional markets in which they do not already have a strong presence.

Disclosure: Binger's firm, Gradient Investments, owns PayPal in its portfolios; Binger does not own the stock personally.