Xero, a New Zealand-based platform for small businesses, is expanding its footprint in the U.S. by acquiring Melio Limited, a bill pay platform serving small and medium-sized enterprises. The acquisition, priced at $2.5 billion, will include both cash and equity components.

Currently, Melio serves 80,000 customers and processes over $30 billion in payments annually. Despite the integration with Xero’s cloud-based accounting solutions, Melio is expected to remain an independent entity. This strategic move aims at combining Melio’s bill pay functionalities with Xero’s existing services, offering a cohesive platform for U.S. small businesses.

As per Xero’s study,
78% of U.S. small businesses prioritize integrated accounting and payment software. This partnership is particularly beneficial to Xero as it opens up new customer bases that do not currently use formal accounting solutions. Both companies plan to develop a distinct payments syndication service, targeting banks and vertical SaaS partners for broader adoption.

Establishing a U.S. Presence

Xero has historically followed a “3×3” approach, concentrating on enhancing core accounting, payroll, and payments solutions in Australia, the UK, and the U.S.

Prior to this acquisition, Xero’s revenue mainly came from markets outside the U.S., with limited presence within it.

The Evolution of Small Businesses

Historically, Melio has collaborated with major companies such as Fiserv and Capital One to introduce its services to small businesses in the U.S. Its white-label service allows vertical SaaS platforms like Shopify to offer payment solutions.

Additionally, Melio has a strong focus on supporting mom-and-pop shops through digital payment technology. In 2022, Matan Bar, CEO and Co-founder of Melio, remarked: “Now more than ever, mom and pop shops must adopt the lessons learned from the pandemic and embrace digital payment solutions. With the help of digital payment platforms, small businesses can concentrate on serving customers rather than managing invoices—ensuring their success even in unprecedented times.”