As PayPal prepares to fly solo later this month, its plan to buy international remittance firm Xoom Corp. for $890 million substantially increases its P2P business. The move, announced last week, likely will intensify the competition in the international remittance arena, particularly for companies targeting U.S.-based consumers sending funds to Latin America and Asia.
The all-cash deal will expand PayPal’s reach in the international remittances sector and enhance Xoom’s capabilities with PayPal’s global payments technology prowess, said Dan Schulman, PayPal’s president. PayPal, which is completing its separation from eBay within weeks, expects to close the Xoom deal during the fourth quarter of this year. Xoom, founded in 2001 in San Francisco, will continue to operate as a separate service with its 300 employees, according to PayPal.
By adding Xoom to its existing Venmo P2P service, PayPal—with 165 million users in 190 countries—will reach new customers in different regions and demographic groups, analysts note. Xoom has 1.3 million users and provides international remittance services in 37 countries via a browser and mobile app-based service that uses a cash distribution network consisting of partnerships with banks, retailers and couriers. Key markets for Xoom include Mexico, India, the Philippines, China and Brazil, and fees for sending funds range from about $5 to $10 per transaction. Xoom also provides utility bill payment services in Mexico and some Central American countries for $2.99 each. Recipients do not need a bank account or Internet connection to receive funds. Senders fund money via bank accounts, credit or debit cards. Xoom partners with money transfer agents, including banks or retailers like Elektra, Famsa and Soriana in Mexico, to distribute funds to recipients, who need to show a transaction number the sender provides, along with identification. Xoom also provides home delivery of cash via couriers in the Philippines and the Dominican Republic.
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