PayPal is paying $25 per share in cash for Xoom, valuing the deal at $890 million, the companies said.
Xoom, founded in 2001, lets U.S. customers send money to others and pay bills in 37 countries, including Mexico, Brazil and India. Users can track their transactions with text updates, email notifications and online access from desktops and mobile devices.
PayPal offers peer-to-peer payments, but it's also known for its merchant payment service and as a check-out option when shopping online. Acquiring Xoom will let PayPal offer international money transfers to its 68 million U.S. customers.
The deal will also let Xoom broaden the number of available markets for its customers' payments, through PayPal's global services.
Xoom will continue to operate as a separate service within PayPal when the transaction closes, which is expected in the fourth quarter of the year.
The deal comes as PayPal prepares to split itself from parent company eBay, to become an independent publicly traded company. PayPal is set to trade on the Nasdaq under "PYPL" on July 20.
Zach Miners covers social networking, search and general technology news for IDG News Service. Follow Zach on Twitter at @zachminers. Zach's e-mail address is zach_miners@idg.com