International money transfer business Ozforex Group Ltd (ASX: OFX) this morning announced it has agreed a deal with cloud accounting business XERO FPO NZ (ASX: XRO) to process international money transfers for Xero customers.
The deal means Xero users in Australia who register with OzForex will be able to make international payments against Xero invoices directly from the OzForex platform.
No details of the financial arrangements behind the deal were revealed, but I suspect OzForex has coughed up a fee for the privilege of tapping up Xero's Australian client base. The deal may also potentially reward Xero further depending on how many of its clients sign-up with OzForex, or there's the possibility that Xero gets to have a look at the OzForex client book in terms of potential new customers, but that's all just conjecture on my part.
As my colleague Sean O'Neill noted, Xero likes to regularly remind everyone just how many customers it has and only this week provided the latest update to note client numbers in Australia and New Zealand now total 400,000.
That's a huge amount of potential new clients for OzForex to target and I suspect those that aren't already clients will be getting a phone call from its representatives soon enough.
I have my doubts over the business model of OzForex and its conflicted remuneration structures as revealed in its Financial Services Guide (FSG), but there's no doubt it looks a winner from this deal, while time will tell if the stock is a good long-term investment.
The market also seems to think the winner from the deal is OzForex with its stock up 6.6% in trade today, while Xero is down 2.4% with no details revealed as to how just how it was compensated in agreeing terms with OzForex.
Xero carries an entirely different set of risks to OzForex and selling for $14.28 it looks an attractive opportunity as it continues to invest for the future.
The US and UK are its two target markets for gangbusters growth and it has reportedly been making some smart recruitment decisions in the UK market. The US is also a big, but challenging opportunity and I imagine a completely different level in trying to crack compared to Australia or New Zealand.
Overall, I sufficiently like its prospects in the UK and ANZ to reward investors, while if it can succeed in the US then the sky really is the limit and today's share price will seem a screaming bargain.
