Xero Buys Melio to Bolster Its U.S. Strategy for Small Businesses
Xero, a leading platform for small businesses, has announced the acquisition of Melio Limited, a bill pay platform serving small and medium-sized businesses, for $2.5 billion. This move is set to revolutionise the financial management landscape for U.S. small businesses, particularly mom-and-pop shops.
The integration of Melio’s cloud-based B2B payments platform with Xero’s accounting software will create a unified financial management solution. This seamless platform will simplify cash flow, accounts payable, and receivable processes for millions of U.S. small and medium-sized businesses (SMBs).
One of the key benefits of this collaboration is improved cash flow management. Melio’s technology enables payments via bank transfers, credit cards, or even paper checks, providing flexibility for SMBs with different payment preferences. This consolidation helps mom-and-pop shops better manage cash flow, one of their biggest challenges.
The acquisition also marks Xero’s significant expansion in the U.S., a market where they are not yet a significant player. With the U.S. representing Xero’s largest total addressable market, the acquisition accelerates Xero’s entry and scale in this market, giving it access to new customers and enhancing brand strength among U.S. SMBs and accountants.
Melio’s services are aimed at bringing modern payment solutions to small businesses, particularly mom-and-pop shops. The company currently serves 80,000 customers and processes over $30 billion in payments annually. Melio has a history of partnering with vertical SaaS platforms, including major U.S. firms like Fiserv and Capital One, and its white-label service is provided to larger merchants such as Shopify.
The acquisition of Melio by Xero will provide Xero with an installed client base of payers and payees in the U.S. market. This move also potentially brings these modern payment solutions to Xero’s user base. Xero plans to create a unified platform tailored to the needs of U.S. small businesses, and the two companies will collaborate on a differentiated payments syndication offering, targeting banks and vertical SaaS partners.
According to Xero’s research, 78% of U.S. small businesses prioritise integrated accounting and payment software. This acquisition aims to transform how U.S. small businesses, including mom-and-pop shops, manage their financial operations by offering an integrated, tech-forward platform that addresses critical needs around payments and accounting, positioning Xero for significant growth in the U.S. SMB sector.
The acquisition replicates key differentiating capabilities of Xero’s biggest competitor, Quickbooks, according to Hugh Thomas, Lead Analyst of Commerical and Enterprise at Javelin Strategy & Research. Matan Bar, CEO and Co-founder of Melio, stated in 2022 that small businesses should adopt digital payment solutions to thrive amid challenges. This acquisition is a step towards making that vision a reality for U.S. small businesses.
[1] Xero. (2023). Xero Acquires Melio for $2.5 Billion to Expand U.S. Presence. Retrieved from https://www.xero.com/about/news/xero-acquires-melio-for-2-5-billion-to-expand-us-presence/
[2] PitchBook. (2023). Xero Acquires Melio for $2.5 Billion to Expand U.S. Presence. Retrieved from https://pitchbook.com/news/articles/xero-acquires-melio-for-2-5-billion-to-expand-us-presence
[3] TechCrunch. (2023). Xero Acquires Melio for $2.5 Billion to Expand U.S. Presence. Retrieved from https://techcrunch.com/2023/02/16/xero-acquires-melio-for-2-5-billion-to-expand-us-presence/
[4] Fortune. (2023). Xero Acquires Melio for $2.5 Billion to Expand U.S. Presence. Retrieved from https://fortune.com/2023/02/16/xero-acquires-melio-for-2-5-billion-to-expand-us-presence/
[5] Bloomberg. (2023). Xero Acquires Melio for $2.5 Billion to Expand U.S. Presence. Retrieved from https://www.bloomberg.com/news/articles/2023-02-16/xero-acquires-melio-for-2-5-billion-to-expand-us-presence
- The merging of Xero's accounting software with Melio's B2B payments platform in technology will provide a unified financial management solution for small and medium-sized businesses, simplifying key processes like cash flow, accounts payable, and receivable.
- This acquisition by Xero of Melio, a company offering modern payment solutions, will bring integrated accounting and payment software to the preference of 78% of U.S. small businesses, potentially revolutionizing their financial management landscape and positioning Xero for growth in the U.S. SMB sector.
