Contact: Scott Denne
PayPal continues to push into the market for the underbanked with its $233m acquisition of TIO Networks. The target provides bill payment services and kiosks utilized by North Americans without access to traditional banking and builds off of PayPal’s $1bn purchase last year of Xoom, which also targeted underbanked populations.
Unlike Xoom, which focuses on international remittance, TIO (formerly known as Info Touch Technologies) mostly serves the US market and was founded to provide bill-pay services (that’s a more recent offering for Xoom). The market for consumers without access to traditional banking may have been too risky for many financial services firms, although as money and payments are increasingly digital, opportunities to serve that sector are expanding.
In addition to enabling PayPal to stretch into another corner of the payments ecosystem, TIO has a modest online bill-pay business that could get a bump under PayPal’s ownership. The deal also gives PayPal a small boost in its dollar-based revenue – the company’s earnings have taken some lumps recently from the strengthening dollar as almost half of its revenue and even more of its profits are derived from overseas markets. By contrast, the majority of TIO’s $57m in trailing revenue was generated in the US.
The transaction values TIO at 3.9x TTM revenue. That’s higher than what PayPal fetches and a turn lower than what it paid for Xoom. That’s likely a function of margin – Xoom was putting up 65% gross margins at the time of its sale, while TIO posted 45% last quarter.
Raymond James & Associates advised TIO on its sale, while Perella Weinberg Partners banked PayPal.
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