Airwallex eyes more SMEs for international payments service

November 26, 2018 14:06
Cross-border payments startup Airwallex aims to build the global financial infrastructure of the next decade, says co-founder and CEO Jack Zhang. Photo: Airwallex

Airwallex, a three-year-old fintech startup focused on international payments for businesses, is stepping up focus on Hong Kong and Southeast Asia, tapping small and medium enterprises in the region that seek to sell more goods in overseas markets.

“We founded the company in 2015 with a single vision to building global economic infrastructure, to help businesses to scale globally,” Jack Zhang, co-founder and CEO of the Melbourne-headquartered firm, told EJ Insight.

Backed by Chinese internet giant Tencent, Sequoia China and Horizons Ventures — a VC fund established by Hong Kong tycoon Li Ka-Shing -- Airwallex can facilitate cross-border payment using a proprietary network without going through the decades-old SWIFT interbank transfer network.

By partnering with over 50 banks globally and integrating with their existing payment infrastructure via API (application programming interface), Airwallex can “pull and push payment using local clearing network, and provide all-in-one payments services package for clients much faster and at much cheaper cost,” said Zhang.

Clients can save at least 70 percent using Airwallex instead of going through traditional SWIFT channel, which takes days to process transactions in general, and bears multiple charges from involving banks, he added in an interview.

Started by four Australian-Chinese entrepreneurs, Airwallex has built its reputation on facilitating cross-border payments for large online marketplaces such as Amazon, along with online industry verticals such as logistics companies, travel agents and education providers.

Revenue and transaction amount of Airwallex has been surging at a monthly rate of about 60 percent in the past 12 months, according to Zhang.

Airwallex handles cross-border payments for enterprises using international currencies. Apart from its Melbourne base, the company has offices in some overseas cities, including London, Hong Kong Kong, Shanghai and Shenzhen. 

“For example, for a local Hong Kong SME that is selling on Amazon, we can issue them a local currency account in the US, so they can receive online payments in US dollar, then we help them to convert the US dollar back to Hong Kong dollar, bringing the money back to its Hong Kong bank account,” said Zhang, offering a use case example.

It also uses premium liquidity providers, which enables the company to pass on foreign exchange rates to customers that are transparent and comparable to interbank rates. The platform then determines the most cost-effective way of settling the international payment through its machine learning technology.

Companies can sign up for Airwallex services for free. Zhang told EJ Insight that the firm only charges service fees for each cross-border payment. “The charging scheme is transparent and far lower than the traditional wire transfer,” he said.

Zhang said his firm can scale up its business “very, very quickly” as it receives the full amount of money from clients in all payment transactions via the platform, “so that we can have almost a zero default rate.”

However, he added that Airwallex is focused right now on continuing its investments and building solid global financial infrastructure, rather than earning big returns quickly.

Enhancing its focus on Hong Kong and Southeast Asia, Airwallex is applying for a virtual banking license in Hong Kong, partnering with the Bank of East Asia (00023.HK) and Sequoia China, with an aim to offer financial services to SMEs to help them grow their businesses in overseas markets.

Zhang said the firm’s machine learning technology is key for the virtual bank. Airwallex has been integrating with global online marketplaces such as Amazon via API, collecting and aggregating sales data of sellers on the marketplaces to generate analyses for financing decision-making to clients.

“For [a client] selling products on Amazon from Hong Kong, we have all your transaction data, consumer purchase data, order information, logistics information, actual return rate, etc. [In loan assessment,] we can calculate how much you have sold, and what’s the cost of goods sold, then we can give you this lending based on the data,” said Zhang.

The company's next plan is to integrate, via API, with finance and business systems around the globe, including accounting platform systems, enterprise resource management (ERP) systems, and customer relationship management (CRM) systems, expanding Airwallex’s data pool and product offering ranges to other industries including insurance and telecoms, as well as utilities and the public sector.

"We want to keep reinvesting into product development and reinvesting into the financial infrastructure, to build the bank of the next decade," Zhang said, adding that the aim is not to compete with the incumbent banks "but to create opportunities that do not exist", in the new internet era.

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EJ Insight writer