PayPal Holdings has agreed to acquire iZettle, one of Europe's best known financial technology startups, for $2.2 billion. 

The deal will enable PayPal to expand its presence in in-store payments globally, and will mark the largest-ever acquisition by the California-based company. 

iZettle is best known for offering small businesses a mini credit card reader that can turn smartphones and tablets into payment registers, similar to that offered by US-based Square, the company founded by Twitter chief executive Jack Dorsey. 

Stockholm-based iZettle is present in 11 countries and offers other services for small businesses such as lending. It had advanced plans to go public. 

By joining forces with PayPal, which operates in 200 countries, iZettle will be able to accelerate its international expansion, including to the US, the companies said. 

Since separating from online marketplace eBay in 2015, PayPal has reshaped itself from mostly processing transactions for its parent company online to offering a suite of digital payment services across the world. 

These range from lending to small businesses, to facilitating money transfers between merchants and customers as well as friends and family. 

Under the leadership of CEO Dan Schulman, the company has been expanding aggressively through acquisitions and partnerships with large banks and technology firms including Bank of America, JPMorgan Chase & Co, Apple and Facebook. 

The deal will also help PayPal provide a more comprehensive suite of services to its merchants. 

iZettle CEO Jacob de Greer and the company's management team will continue to lead the business, which expects to process $6 billion in payments in 2018 and have gross revenues of $165m.