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Weeks Before the eBay Split, PayPal Acquires Digital Payment Provider Xoom

Op-ed - Weeks Before the eBay Split

Paypal announced on Wednesday that it was acquiring San Francisco-based Xoom, a company that facilitates the digital transfer of money internationally, Forbesreports. The all-cash deal values Xoom at $890 million, or $25 a share.

“Expanding into international money transfer and remittances aligns with our strategic vision to democratize the movement and management of money,” said PayPal President Dan Schulman.

“Acquiring Xoom allows PayPal to offer a broader range of services to our global customer base, increase customer engagement and enter an important and growing adjacent marketplace,” he said. “Xoom’s presence in 37 countries – in particular, Mexico, India, the Philippines, China and Brazil – will help us accelerate our expansion in these important markets.”

Xoom is a digital money transfer provider that enables consumers to send money and pay bills for family and friends around the world in a secure, fast, and cost-effective way, using a mobile phone, tablet or computer. Founded in 2001 by PayPal investor Kevin Hartz and serial entrepreneur Alan Braverman, the company went public in 2013.

“Becoming part of PayPal represents an exciting new chapter for Xoom, which will help accelerate our time-to-market in unserved geographies and expand the ways we can innovate for customers,” said Xoom President and CEO John Kunze. “Being part of a larger, global organization will help us deliver the best possible experience to our customers, while maximizing value for our shareholders.”

“I’m excited to announce that PayPal is ready to make another area of payments better for people around the world – international remittances,” added Schulman in another post. “Today, this primarily cash-based system of sending money abroad can be time-consuming, insecure and expensive. We believe [the Xoom] acquisition will allow PayPal to quickly expand into the large and growing global money transfer market. Xoom has what we believe is the most advanced technology platform in this space with a majority of its transactions taking place on mobile devices.”

The announcement of the acquisition comes only a few weeks before PayPal’s planned split with eBay. The separation will allow the two companies to more effectively pursue distinct operating priorities and strategies and opportunities for long-term growth and profitability. In particular, PayPal’s management will be able to focus exclusively on its payments business, and enjoy “increased flexibility to pursue new partnership and strategic opportunities that may have previously been unavailable for strategic or other reasons.”

It’s interesting to speculate about how the Xoom acquisition might influence PayPal’s improving but still uncertain attitude toward Bitcoin, and worth noting that Xoom seems at least open to the digital crypto-currency. “If bitcoin could help us be more efficient, we’d use it,” said Kunze in a 2014 interview with PYMNTS titled “Is Bitcoin The Future of Money Transfer?

“I think anyone that wants to move money from point A to point B has to deal with two very important challenges that, for bitcoin to succeed, players in that ecosystem must also solve in addition to still being efficient and not costly,” he added. The two challenges are, according to him, defending against money-laundering threats, and not moving money that was sourced from or used for illegal purposes. “Unless the bitcoin ecosystem self-regulates and gets consumer protection in place, and deals proactively with money-laundering risks, the regulators will start regulating them,” he said.