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Why PayPal Suspended TIO Networks’ Services

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PayPal investigating TIO platform

US-based (SPY) online payments provider PayPal (PYPL) recently announced the suspension of TIO Networks’ operations due to concerns about customer data security. TIO Networks is a cloud-based bill payments processor based in Canada that was recently acquired by PayPal. Its clients include major utility, wireless, and cable companies in North America.

PayPal decided to suspend TIO services after it discovered security vulnerabilities on the company’s platform. The suspension of the services was also due to the realization that TIO’s data security program fell short of PayPal’s data security standards. PayPal is reviewing TIO’s bill payment platform as part of an investigation that has also seen the company retain the services of a third-party cybersecurity expert.

A $238 million acquisition

PayPal acquired TIO Networks for about $238 million in a transaction completed in 3Q17. It’s unclear how the ongoing investigation would impact costs and expenses associated with the integration of TIO into PayPal’s system. However, the acquisition was viewed as fitting in PayPal’s ambition to provide comprehensive digital payments and financial solutions as it seeks to broaden its revenue streams.

Credit business

In addition to its traditional business of supporting online payments, PayPal has expanded its offerings to include peer-to-peer money transfer and small business loans. PayPal has extended more than $3.0 billion in small business loans since the inception of credit services in 2013. Amazon (AMZN) and Square (SQ) have on their parts supplied about $3.0 billion and $1.8 billion, respectively, in small business loans since launching their credit businesses.

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