Why Xero won Australia, but will struggle in America

For more than a decade, Australian investors have been proud of Xero. Rightfully so. It’s one of the few genuine global software successes to emerge from our market. It rewrote the rules for small business accounting, built a fiercely loyal community of accountants and dethroned MYOB, a near monopoly incumbent.

But what’s interesting today is not only the story of how Xero won Australia, but the mirror image of that story, why Xero, for all its strengths, is unlikely to find the same level of success in the US. And why the same structural barriers that prevented Intuit from cracking Australia are the very reasons Xero is struggling to make meaningful headway in Intuit’s home market.

This inversion matters for investors. Especially those assessing long-duration compounders like Intuit. Because if Xero’s Australian triumph once looked like a blueprint for a global rollout, the US has proven instead that competitive dynamics aren’t universal; they’re local.

Let’s start with the Australian story.

Xero’s perfect storm in Australia

When Xero entered the Australian market, MYOB and Reckon dominated small business accounting. Both were successful companies, but they were products of their era: installed desktop software, with licences managed on local machines, often with infrequent upgrades.

That architecture had limitations:

• Data wasn’t easily shared
• Multi-device access was clunky or impossible
• Collaboration between accountants and clients was painful
• Offline systems lacked real-time functionality

Then the world shifted to the cloud. And Xero was cloud-native.

A cloud-native competitor arriving during a platform transition is one of the few moments when a smaller player can credibly unseat an incumbent. It’s a Clayton Christensen-style textbook case: the incumbent is trapped supporting legacy architecture, high-value customers and a code base built for a different computing era, while the new entrant designs for the new paradigm from day one.

Xero offered:

• Real-time collaboration
• Automated bank feeds
• Always-on updates
• Ease of use accountants actually liked
• A modern UI in a market that had seen little innovation

And, critically, accountants, who are the true gatekeepers, shifted in its favour. Once accountants standardise on a platform, they bring their entire client base with them.

This wasn’t luck. It was an industry at an architectural inflection point, where being cloud-first gave Xero a real, durable wedge.

Why Intuit couldn’t crack Australia is the same reason Xero won’t crack the US

The irony is powerful.

The same forces that made it difficult for Intuit to make meaningful inroads into Australia are precisely the forces that make it extraordinarily difficult for Xero to dent Intuit’s dominance in the US.

Let’s break those down.

1. The US is a tax jungle and Intuit built the map

Australia’s tax system is centralised and reasonably uniform. The US is not.

Every state has:

• Different tax rules
• Different filing systems
• Different payroll compliance
• Localised quirks around reporting and withholding

Then add city taxes, county rules and the sheer administrative chaos of the American regulatory environment.

Intuit has spent decades building deep tax infrastructure into its products. QuickBooks isn’t just accounting software; it is the compliance engine for small American businesses.

That infrastructure is not easily replicated. It takes:

• Tens of thousands of engineers over decades
• Long regulatory relationships
• Enormous datasets
• Embedded integrations that become industry defaults

Xero has brilliant software, but it cannot brute-force this complexity quickly, and certainly not cheaply. You can’t buy your way into tax-domain expertise the way you can buy an add-on app.

In other words, while Australia was a “clean” cloud transition, the US is a deeply regulated ecosystem designed around the incumbent.

2. Intuit outspends Xero by orders of magnitude

Investors often talk about “scale advantage” in software without appreciating how extreme it is here. Intuit almost spends more on R&D in a single year than Xero generates in total revenue. That creates a widening gap, because Intuit deploys that R&D across:

• AI-driven tax prep
• Automated bookkeeping
• Fraud detection
• Cash flow forecasting
• Payroll and compliance
• CRM and marketing tools
• Instant payments and working capital advances
• Deep third-party integrations

This is not an accounting app, it is a full operating system for small businesses.

Xero is a brilliant accounting platform. Intuit has built a vertically integrated SME infrastructure platform. And in a massively fragmented regulatory environment like the US, platforms beat products.

3. Intuit owns the full payments stack while Xero does not

One of the most under-appreciated drivers of Intuit’s competitive strength is payments.

The company isn’t simply bolting on payments through third parties. It is building, and increasingly controlling the payments infrastructure itself:

• Payment acceptance
• Instant transfers
• Bill pay
• Invoice ingestion
• Working capital lending
• Merchant analytics

Most importantly, Intuit owns the stack.

Xero has historically relied on partners like Stripe and bill.com for payments capability, which limited its control of the customer experience. The acquisition of Melio is a meaningful step toward owning more of the payments workflow, particularly around accounts payable. However, it still falls well short of Intuit’s fully integrated payments stack. Intuit controls payment acceptance, instant transfers, bill pay, invoice ingestion, risk scoring and working-capital lending inside a single platform. Owning the entire stack gives Intuit better margins, tighter integration, less dependency on partners and a far richer data signal for AI. Melio helps Xero close a gap, but it does not erode Intuit’s payments moat.

In a future where accounting and payments are merging into a unified cash-flow command centre, Intuit is architecturally advantaged in a way that Xero simply can’t match.

4. Intuit owns the entire customer experience

Xero wins accountants first, and accountants bring the clients.

Intuit wins both, accountants and small businesses directly.

QuickBooks has brand saturation in the US that Xero simply can’t approach:

• It’s the default in undergraduate accounting courses
• It’s embedded in vocational training
• It’s used by most bookkeepers
• It’s the default setup for new US businesses
• Banks integrate directly into its workflows

Intuit is the gravity well of small-business finance in America. Everything orbits around it. Xero is respected, but it is not gravitational.

5. Intuit is expanding its moat through AI

AI is a large-scale compute and data game. Intuit has both:

• More transactions
• More tax data
• More payment flows
• More payroll runs
• More years of customer history
• More ingestion endpoints

AI is turning compliance, reconciliation and classification into automated tasks. Intuit has the data density to train models that can perform these tasks with extremely high accuracy.

Xero simply cannot match that data scale.

For investors, this is crucial: AI is reinforcing the moat, not compressing it.

The investor takeaway: Xero vs Intuit is an asymmetry story

Xero is a phenomenal business.
But Intuit is a platform.

Xero was born at the perfect moment to disrupt Australia’s accounting incumbents. Intuit, however, built an integrated platform over decades in a market with enormous regulatory and functional complexity.

Xero’s success in Australia was a feature of timing, architecture and incumbent rigidity.
The US is a different equation entirely: greater complexity, a larger stack and an incumbent with unmatched scale.

For investors, this is why Intuit is such a compelling long-term compounder in our portfolio. It is not merely a leader; it is a structurally advantaged leader.

Where Xero succeeded by exploiting a moment in time, Intuit succeeds by continually broadening and deepening its ecosystem. And as long as it continues to own the customer experience, the payments rails, the compliance engine and the data backbone, its competitive position in the US remains one of the strongest in global enterprise software.