Xero has made a very big acquisition in the United States, paying US$2.5 billion (approximately NZ$4.1 billion) for small to medium sized business bill payments provider Melio, in cash and equity, with another US$0.5 billion payable over three years as a contingent consideration.
New York headquartered Melio is a relatively young company, having been founded in Israel in 2018. It has focused on the US market; the deal announcement said Melio has 80,000 customers, and processed over US$30 billion in payments in its 2025 fiscal year, ending March 31.
That activity generated FY25 revenue of US$153 million, and annualised revenue of US$187 million.
Melio is co-founded by former eBay and PayPal executive Matan Bar who with his associates saw an opportunity in the very large but “antiquated” US market, which uses slow and manual paper-based transactions, to speed up payments with digitisation.
Essentially, Melio is a business-to-business platform that seeks to capitalise on making invoicing and payments easier for merchants at the small end of the town, with technology. It already has Xero integrations, and with the Quickbooks US accounting software, although the latter partnership ceased last year for bill payments.
Like Xero, Melio operates a tiered subscription model. Its plans start at US$2.50 a month, and increase in cost with greater payments volumes, features and integration with financial software.
Xero chief executive Sukhinder Singh Cassidy said buying Melio aligns with the New Zealand founded company’s “3x3” strategy of focusing on core accounting, payments and payroll.
“Adding Melio’s world-class team, technology platform, and innovative accounts payable solutions to Xero enables a step change in our North America scale, and the potential to help millions of US SMBs and their accountants better manage their cash flow and accounting on one platform,” Cassidy added.
Will Melio come to New Zealand and Australia Xero subscribers?
Cassidy referred to Melio’s features being embedded in Xero’s core platform, but for now, it seems destined for the US market only.
“The acquisition of Melio enables Xero to meaningfully accelerate its 3x3 strategy in the US, offering full payments capability across our own invoicing solutions and Melio’s bill pay solutions that will become fully native to our platform,” Xero spokesperson Kate McLaughlin said.
McLaughlin added that payments is a critical need for US SMBs, and they want them integrated with their accounting. Which, as Bar noted some years ago, can be “antiquated” compared to other regions, something that Xero is eyeing up.
“There is a huge opportunity with millions of [US] SMBs yet to digitise their accounting and their payments with cloud based software,” McLaughlin said.
In the United States, Xero reported 400,000 North American subscribers for the 2025 financial year, McLaughlin said.
Xero already integrates with other payments services such as Stripe, GoCardless and PayPay; where does the Melio buy leave them?
“Stripe, GoCardless and PayPal are fantastic partners and solutions for our customers' accounts receivable needs - there will be no changes to these options,” McLaughlin said.
“We know our customers have different needs and that there may be other solutions that suit them better, so we will continue to support other payments providers on our platform just as we have always done,” she added.
Xero’s acquisition of Melio is subject to regulatory conditions, and a shareholder vote at the latter entity to approve the merger.
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