The completion of Xero’s almost $4 billion acquisition of Melio earlier this month could reshape the ASX market darling, as the accounting platform tries to wedge itself between customers and banks — but its expansion into payments is not without risks.
Many companies have tried to go down a similar road before. Like in the US, retailers including Woolworths and Coles attempted to move into payments during the early 2000s, while Meta’s much-hyped but short-lived Libra thought bubble was a more recent effort. Most eventually pulled back — and for good reason. Margins can be slim, regulation is heavy, and the penalties for getting it wrong can be serious.
It’s striking, then, to see Xero drop its partnerships with dedicated payments providers like Bill.com and pay top dollar to go it alone. For Xero, the strategic rationale is simple: gain a decent foothold in the prized US market, expand its value proposition and drive revenue growth.
“Melio’s US presence provides a step change in Xero’s US value proposition and scale, driving a ~3x increase in Xero’s North American revenue and ARPU on day one and allows us to unlock a flywheel that better enables investment for scale in the US,” a Xero spokesperson told Capital Brief.
