As China’s digital payments industry has become somewhat saturated after years of explosive growth, mainland service providers have begun stepping up focus on overseas markets. Amid such efforts, WeChat Pay, the payment service of internet giant Tencent (00700.HK), has chosen to partner with EMQ, a startup that is building a financial settlement network in the Asian region to offer secure and affordable remittances for businesses and individuals.
In an interview with EJ Insight, EMQ’s co-founder and CEO Max Liu said his Hong Kong-based firm “is the pipes and distribution for Tencent.”
“You can think of EMQ as building infrastructure, rails in countries,” said Liu, describing EMQ as a “hub-and-spoke business”.
“We hub into a country, find a partner bank, then we integrate. Beyond the hub, we ‘spoke’ into last-mile partnerships, which are the digital wallets, telecoms companies for mobile wallets and cash pickup points, gaining immediate access to thousands of distribution points across Asia.”
On entering foreign markets to build the network, Liu said they first approach the regulators or the central banks, and “we ask them what it takes to operate our business legally in the country — there is absolutely no shortcut.”
After obtaining the relevant permit or license in coordination with the regulatory requirements, the company will seek to get a local bank partnership. “We usually have to go through the banks’ reviews on various perspectives including legal, risks, audits and compliance.”
Liu said it took two years for EMQ to get the first bank cooperation, from initial contact to the bank’s approval.
Through the partnerships and account opening and system integration with banks in different countries and regions, EMQ has built a dedicated cross-border settlement network.
When EMQ receives funds in a local account for cross-border payment, it pays the recipient via EMQ’s account in the foreign country. “A lot of the cost and time can be saved by taking away the multiple intermediaries in cross-border remittance,” says Liu.
Building the network step-by-step in foreign markets, the startup has won the trust of tech and financial heavyweights. In 2017, it was roped in as a partner for Tencent’s WeChat Pay, as the payment service launched its Hong Kong ‘We Remit’ cross-border payment offering.
With the ‘We Remit’ service, foreign domestic helpers in Hong Kong who intend to send money back home, for instance, do not need to go to ae bank or remittance shop in person. They can just enter the payee information via WeChat mobile wallet, and then the money can be sent to the foreign bank account, e-wallet, pawnshops, or cash pick-up points in about 10 minutes, Liu says.
“EMQ provides services in cross-border payment settlement and payments solution, on behalf of Tencent.”
The four-year-old startup established a partnership with Shanghai Commercial Bank (Hong Kong) for cross-border remittance in 2015, and joined forces with fintech peer QFPay in 2017 to boost merchant settlements across Indonesia.
Media reports have said previously that EMQ has also been in talks with Tencent’s arch-rival Alibaba and its payment affiliate Ant Financial.
Speaking to EJ Insight, Liu declined to comment on any relationship with Ant Financial.
“In addition to Tencent, of course, we have other technology companies as our clients, but because of the NDA (non-disclosure agreement) signed, I cannot discuss individual clients,” he said.
Liu stressed that EMQ can provide payment network “infrastructure” for any enterprise that needs cross-border payment services, and that he believes this gives the firm an advantage amid fierce competition in the remittance business in recent years.
“Ninety-nine percent of fintech companies own or will develop retail business, but we only focus on establishing a compliant and neutral settlement network,” he said. “We do not compete with our clients.”
Liu told EJ Insight that the company will not participate in the direct-to-consumer business, and will only provide services to corporate customers such as e-wallet operators, behind the scenes. “I don’t see another company which has, or is building, a neutral network in Asia,” he said.
The market has seen a boom of startups emerging in the past few years, with many of them aiming to take on traditional banks and financial institutions, trying to disrupt the financial order around the globe. EMQ, however, has joined hands with banks to build its proprietary cross-border settlement network.
On how a ‘David’ can partner with ‘Goliaths’, Liu said: “We are not trying to disrupt anyone, nor intend to fend off the banks.”
The reason behind EMQ’s strategy of partnering with banks is that Liu believes that the supervision of the financial system from authorities around the world will become increasingly stringent in the future. “Every startup has its own path,” he said. “We work with (banking) institutions because it is very important for us to be regulated and compliant with authorities.”
“It’s not a zero-sum game between the fintech startups and the banks,” Liu said. By joining EMQ’s cross-border settlement network, many regional, small and medium-sized banks can also access the remittance and settlement business of overseas customers, and this partnership benefits both sides, Liu claims.
EMQ currently has a footprint in about 10 major markets in Asia, including China, Hong Kong, Singapore, India, Indonesia, Vietnam, Cambodia, and the Philippines. Moving forward, the company plans to cover the 14 major markets in Asia region in the next six months.
Plans are also underway to expand across the Middle East, Europe and the United States, according to Liu.
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