Payments startup iZettle AB, a Swedish rival to Jack Dorsey's Square Inc., will start selling a credit-card reader that lets shoppers pay by tapping the device with a smartphone or bank card.

The company, whose card-deck-sized devices are used by car-repair shops and street-market vendors, said the new reader works with chip-and-PIN and contactless payment cards as well as mobile applications such as Apple Pay and Google Wallet. It'll start selling in the U.K. on June 1 for 79 pounds ($124) and will roll out to other markets in the coming months, Stockholm- based iZettle said today.

IZettle is seeking a leg-up on competitors vying for a share of Europe's estimated 2.2 trillion euros ($2.5 trillion) in annual card payments. Credit and debit cards that can be used by tapping the reader are gaining users, and mobile apps are set to further boost the popularity of contactless paying. Last year, contactless payments more than tripled to 319 million transactions in the U.K., iZettle said.

"It's not until services like Apple Pay that this technology starts to really make sense, both for card holders and merchants," Jacob de Geer, founder and chief executive officer of five-year-old iZettle, said in an e-mail. "This is the first true step towards a true mobile payments environment, when you can start to leave your wallet at home."

The company also said it's starting services in France, its 11th market.

Apple Pay was started in the U.S. in October. U.S. companies such as Home Depot Inc., Macy's Inc. and Whole Foods Market Inc. are planning to use the Apple Inc. service to tap into a market that's likely to process $67 billion worth of sales this year, according to Forrester Research.

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