PayPal acquires money transfer startup in big-money move

PayPal is acquiring money transfer startup Xoom for $25 per share, a total of $890 million.

Dan Schulman, PayPal president, hopes that the acquisition will enable his company to target additional markets where Xoom already has a growing presence.

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

In addition, Xoom is primarily focused on money transfers between friends and family, while PayPal’s has generally been used for commercial transactions. By acquiring Xoom, PayPal can also begin targeting remittances that are less business focused. Being part of a larger organisation will also enable Xoom to expand its userbase and push its portfolio into new markets.

Xoom shareholders will also benefit from the deal, with stock trading at around $22 yesterday, which although down from its peak of $34 in July 2013, is a significant increase on the $17 value being traded in January.

The acquisition is expected to close in the fourth quarter of 2015, at which point Xoom will operate as a separate service within PayPal.

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PayPal will be hoping that the acquisition takes some of the spotlight away from the controversy surrounding changes to its user policy. Last month the firm faced criticism over reports that it could send customers automated calls and messages. PayPal has since apologised for the lack of clarity in its terms and conditions, admitting that it did not live up to its usual standards.