PayPal has scooped up digital money transfer provider Xoom for US$890 million ahead of its separation from eBay on July 17.

A dominant player in the online payments industry, PayPal will pay US$25 per share of Xoom in what amounts to a premium of 32 per cent over the stock’s average price over the past three months.

As part of its separation, PayPal will start out with US$6 billion in cash, which means more acquisitions could be on the cards.

President of PayPal, Dan Schulman, said the move will help the company expand into the international money transfer market in line with its strategic vision to democratise the movement and management of money.

“Acquiring Xoom allows PayPal to offer a broader range of services to our global customer base, increase customer engagement and enter an important and growing adjacent marketplace,” he said.

PayPal cited Xoom as a leading service for letting people in the US pay bills or send money to family members or friends in other countries using mobile phones, tablets or computers.

Xoom has a presence in 37 countries, including Mexico, India, the Philippines, China and Brazil, which will help PayPal accelerate its expansion of international money transfer and remittances in these important markets.

PayPal currently has 68 million customers in the US, while Xoom has 1.3 million customers.

CEO of  Xoom, John Kunze, said the deal will help it expand into “unserved geographies”.

The plan calls for the distribution of PayPal stock to eBay shareholders on July 17, with the financial unit starting to trade under the symbol PYPL on July 20. eBay has already laid off thousands of employees in anticipation of its split from PayPal and has disclosed a plan to spin-off its PayPal online payments unit, which will trade as an independent.

The acquisition is  expected to close in the final quarter of this year.