Global slowdown in fundraising? What global slowdown in fundraising? Meet the new unicorn in town: Hong Kong-headquartered payments firm Airwallex.
The company founded in 2015 by Chinese-Australian entrepreneur Jack Zhang looks immune from the investor penny-pinching after bringing in money from one of the world’s most active tech venture capitalists, DST Global.
In a statement published on Tuesday, Airwallex said its $100 million Series C fundraising also raised new funds from existing investors Sequoia Capital China, Tencent, Hillhouse Capital, Gobi Partners, Horizons Ventures and SquarePeg Capital.
The round brings Airwallex’s capital raised to over $200 million and took less than two months to complete. It also takes the startup's valuation above the magic $1-billion level.
To be sure, Zhang and other employees at Airwallex are still in the driving seat, holding a majority of the shares. The team fiercely guard their independence even as many peers are snapped up by global titans looking to piggyback on local networks.
Mastercard acquired Transfast, a global cross-border account-to-account money transfer network, while Visa bought UK-based Earthport and Paypal bought Hyperwallet.
“We’re probably one of the only ones left but we aren’t interested in M&A,” Zhang said, highlighting how the company has turned down numerous lucrative deals.
Airwallex has been growing so quickly that it has been difficult to value and only achieved a fraction of its plans, he added.
Airwallex processed billions of US dollars in payments last year and Zhang says it is on track to process $10 billion-plus in 2019. Its revenue is growing at a phenomenal pace – so much so that by the end of 2019, its revenues will likely be five times what they were a year earlier.
“It just doesn’t make sense to sell,” he said.
To fund this growth Airwallex will likely launch another round of fundraising later this year or early next year. It has no plans to float its shares on a public market as long as it can tap private markets. “We’re not in a rush to IPO, at all,” Zhang said.
Airwallex is one of six Australian Startups to Watch profiled in the Autumn 2018 issue of FinanceAsia's magazine.
PAYMENTS EXPLOSION
The 34-year old Zhang sees Airwallex handling a growing slice of Asia’s digital payments explosion.
As small businesses from e-commerce players to digital travel agencies across Asia grow online they are looking for ways to send bite-sized chunks of money overseas as cheaply as possible. Fintech firms are stepping up.
While there are already a plethora of fintech startups and also bank initiatives in this space, such as DBS’s Digibank and BTPN’s Genius, Zhang’s Airwallex has an interesting edge: it has Tencent as an early-stage investor, which still holds a little over 10% of the company.
Airwallex is knitting together a global network of banks to create an end-to-end payments platform – dramatically undercutting Swift, the vast messaging network for money transfer instructions. Zhang, who previously worked at ANZ, National Australia Bank and UK insurer Aviva, has claimed Airwallex’s fixed transaction fee for pay-out is less than 10% of what Swift charges.
“We want to be embedded into service providers so they can take advantage of the brand new global financial infrastructure without doing too much of the work,” Zhang said.
So far Airwallex has relationships with around 50 banks to enable them to make cross-border payments in real time, unlike Swift, which can incur delays.
Zhang, who worked in the technology departments in FX and investment banking, became frustrated with the slow pace of change at traditional banks. He wanted to offer clients a radically different proposal.
“We’re a technology layer on top of global banking. We partner with banks to offer offline to online payment services in a unified operating system,” Zhang said.
GLOBAL EXPANSION
Its new capital will be used to expand Airwallex’s suite of international collection and payment products and to support expansion into the US, Europe and Southeast Asia.
“We want to replicate what we achieved in the Asia Pacific [region] across Europe and North America,” said Airwallex chief executive and co-founder Zhang in an interview with FinanceAsia.
Airwallex won a new money license in the UK in February and has set up an office in London. The aim is to use this as a gateway into Europe, but because of Brexit Zhang has a backup plan to apply for a European license within three months. The firm recently opened an office in San Francisco too.
Zhang, who was born in the eastern Chinese province of Shangdong, is also positive about Hong Kong’s integration with its hinterland, the Greater Bay Area.
Airwallex has applied for a virtual banking licence in Hong Kong, even moving its headquarters to the city from Melbourne in Australia and teaming up with local player Bank of East Asia in support of its bid. However, its current application has been unsuccessful, according to people familiar with the matter. Zhang declined to comment on regulatory matters.
Airwallex, nonetheless, plans to double the size of its Shenzhen office to about 60 people. The firm will also look to double its staff in Hong Kong and partner with virtual banks to offer banking products.
Investors seem to understand that the fintech firm needs time to build its banking network and grow its staff, which currently numbers 260 people, up from about 110 in July.
“We’re looking to double again in the next 12 months to more than 400 by the end of the year,” said Zhang. Airwallex is particularly looking to build out its San Francisco and London offices.
Apart from global expansion, Airwallex plans to use its cash infusion to layer more applications onto its platform. It plans to launch a card business later this year, issuing cards to payer and payee, which is a higher margin business. The aim is to allow the bank account network it has built up to start receiving online and offline payments via cards, as well as push payments to cards over its network.
Airwallex offers an end-to-end solution for businesses to move money around programmatically on a global scale. With Airwallex, customers can create international bank accounts instantly, access interbank exchange rates and send money through local and international clearing networks to more than 130 countries.
Founded in Melbourne, Airwallex’s clients include China’s JD.com, Tencent and Ctrip, and financial service companies including MasterCard.
“The growing e-commerce industry needs a technology-focused payments network that is reliable, cost-effective and provides data transparency. Airwallex has built such a network,” said Tom Stafford, managing partner of DST Global in a statement.
DST has previously backed internet giants Facebook, Airbnb and Spotify, and fintech leaders Stripe and Robinhood.
