Xero Acquires B2B Bill Pay Platform Melio for $2.5 Billion

New Zealand-based small business platform Xero is set to acquire Melio for $2.5 billion.

The deal, announced Tuesday (June 24) evening, gives Xero access to Melio’s service, a small and medium-sized business (SMB) bill pay platform linking accounting and payments.

“Adding Melio’s world-class team, technology platform, and innovative AP solutions to Xero enables a step change in our North America scale and the potential to help millions of U.S. SMBs and their accountants better manage their cash flow and accounting on one platform,” Xero CEO Sukhinder Singh Cassidy said in a news release.

“Xero and Melio are highly complementary — together they complete the key jobs to be done for U.S. SMBs, extend reach across customer segments, provide both direct and syndicated offerings, and deliver multiple revenue drivers.”

The release notes that accounting and payments (AP) are crucial needs for American SMBs, with the majority of these companies prioritizing the integration of these software offerings.

Xero adds that the U.S. SMB payment total addressable market is a $29 billion opportunity, “which is growing and supported by digitization of AP whitespace for business-to-business payments and increasing demand for software solutions that help customers save time and manage cash flow.”

The acquisition comes at a time when many businesses still rely on outdated methods for their payments and accounts payable (AP) systems, per recent PYMNTS Intelligence research, which highlights the urgent need for companies to move away from things like paper checks, which were cited as substantial drains on time and financial resources.

According to “Virtual Mobility: How Mobile Virtual Cards Elevate B2B Payments,” done in collaboration with WEX, almost 73% of businesses have yet to automate supplier payments, significantly limiting their ability to gain a comprehensive view of money movement.

“This contributes to substantial challenges, with 51% of firms reporting excessive manual data entry, 47% experiencing data errors and process delays and 23% noting a lack of visibility in their AP processes,” PYMNTS wrote.

In addition, the report detailed specific operational roadblocks, such as the ongoing problem of late payments for small businesses, which experienced an average delay of 9.1 days in the third quarter of 2024, which translates to a total payment wait time of 28.7 days.

“It underscored how the adoption of advanced payment methods can significantly enhance the financial stability of smaller firms,” PYMNTS added.