PayPal’s acquisition of Xoom opened the gateway to multi-channel international money transfers
The PayPal brand has already become a household name among all e-commerce users. It works as an embedded payment option on online market platforms such as eBay, Etsy, or Amazon, as well as across all Google products and services, including for P2P transfers.
Its acquisition of Xoom Corporation in 2015 opened the gateway to multi-channel international money transfers as well. Even taken together, these two companies cannot compete with the well-known remittance giants such as Western Union and MoneyGram or even with fintech disruptors like TransferWise. Nevertheless, they do have a stable client base that continues to grow.
Some stats & History
Over the first two years after the acquisition, Xoom’s active users increased by more than 30%. It brought 50% more international transactions per month. It is no wonder, considering that the company now has an ability to leverage PayPal’s existing relationships with their over 200 million active account owners.
In fact, once known as an eBay subsidiary, PayPal has come to dominate the global market for electronic payments. It was created shortly before the new millennium as Confinity, Inc. Elon Musk was one of the first people to see and develop the company’s potential. Quite soon, eBay bought this great payment solution taking its benefits to a truly global scale.
Currently, PayPal operates in 202 markets worldwide, having about 255 million active users and 22 million merchant accounts.
While PayPal was only starting to gain in scope as eBay’s flagship, Xoom was founded in San Francisco and started to raise funds from VC investors. They were successful due to the high level of service security, the integrity of users’ accounts and fraud prevention policies. Some users complained about too much scrutiny on Xoom’s behalf which resulted in the additional transaction or identity verification and transfer limits. Nevertheless, many mass medias mentioned the service among the most promising and trustworthy remittance businesses.
The deal between the two financial firms has strengthened PayPal’s international business and brought Xoom better adoption in places where PayPal is a visible brand with an established customer base.
How PayPal and Xoom work
If you wish to send money internationally with PayPal or Xoom, you need to register for the service. Both website and app provide such an opportunity.
If your recipient is also a PayPal user, you can easily transfer money to an existing PayPal account. It’s possible via the corporate payment platform. Their global transactional engine is partially open, using Adaptive Payments API and Adaptive Accounts API to encourage more micropayments and applications that facilitate them. Namely, Adaptive Payments API has capabilities for currency conversion, enhancements such as faster pre-approval, and can send payments between many types of mobile devices. The transfer is practically immediate.
If the recipient doesn’t have a PayPal account, Xoom steps in. You can send money in the following ways:
- deposit to a bank account;
- credit card deposit;
- debit card deposit;
- pickup at partner locations;
- delivery to your recipient’s home;
- bill payment;
- mobile airtime top-up.
Speed of money transfer service for Xoom is subject to many factors such as agent or banking hours of operation and approval by the Xoom proprietary anti-fraud verification system. Usually, the transfer needs a few banking days.
In addition to normal processing time, sending over 10,000 USD or 6,000 CAD within a 24-hour period may add 2 to 3 business days for bank processing, when sent before 4 p.m., PT. In cases when you send more than 1,000 CAD, Xoom may need to verify your address and financial account (additional documentation will be required and that may take time). They’ll do this check once to upgrade your sending limits.
Bills are paid instantly, except for Telmex bills in Mexico, for which payment takes two business days.
There is one more limitation – you can only send money from the United States or Canada.
Xoom does not have a physical presence in other countries such as local field offices. Though it deals with cash pick-ups, the company has contracts with local banks or retail chains to distribute funds and, in some countries, Xoom works via 3rd parties like Earthport to obtain such service. All money transmission is provided by PayPal, Inc.
PayPal & Xoom fees
If you send money to a PayPal account in another country, you’ll pay:
- a transaction fee – 5% of the send amount (minimum of $0.99 USD – maximum of 4.99 USD)
- a funding fee 2.9% of the transaction amount funded this way plus a fixed fee based on currency (check it here). Applicable only if a transaction is funded by a credit card, debit card or PayPal Credit.
If you send money by one of the Xoom methods, the fees are:
- transaction fee – starts from $4.99 and can go up to approximately $300. The price can be estimated before a transaction using a fee calculator. The general rule is that the price goes up along with the amount of money transferred. It is low for paying with a bank account, but high when you pay with a debit or credit card. Moreover, your credit card company may charge an additional cash advance fee for such transactions. If you send money to Canada, Australia, some EU countries, etc. and choose to fund a bank deposit from your bank account, the transit is free of charge.
- In addition to the transaction fee, Xoom also makes money on currency exchange rates. It is not shown explicitly, but gets included in a transaction fee. Their FX markup has decreased significantly over time due to fierce competition, however, it is still not the lowest one.