Growth management

How a unicorn like Airwallex stands up to a challenge (like a pandemic)

The Tencent-backed global payments and foreign exchange unicorn debuted its borderless card last month in Australia, but headwinds, such as the COVID-19 pandemic, is taking its toll on its existing client base.

Airwallex debuted its borderless card in partnership with Visa in Australia last month, targeting businesses needing a convenient way to pay suppliers abroad. Despite the ongoing COVID-19 pandemic, the payments startup, which achieved unicorn status last year, expects the UK card launch to go as planned later this year.

Specialising in business to business (B2B) cross-border payments and low-cost foreign exchange, the company is filling a gap overlooked by larger financial institutions. And while the pandemic’s effect on Airwallex’s business has been minimal, it is now looking to support clients who are more severely impacted.

“Anyone in a business that's experiencing difficulties can reach out to us and our team,” Lucy Liu, Airwallex president and co-founder, told FinanceAsia

Having weathered the height of China’s own COVID-19 emergency from their Shanghai offices in February, “we’re able to… give them advice or help them with whatever questions they have,” Liu said. “We are just doing a small part to make everyone less stressed about what is already a very stressful situation.”

Keep calm, carry on

Beyond the immediate disruption, Airwallex has found a valuable market gap to target. The company saw between a five and six-times growth in revenue in 2019, in line with predictions made by Airwallex chief executive Jack Zhang last year.

Which maybe why large corporates are on a mission to hoover up such companies. Over the past year, Mastercard acquired six payments-related fintech companies according to Crunchbase, including cross-border payment startup Transfast, while Visa came into possession of another five.

“We’re probably one of the only ones left but we aren’t interested in M&A,” Zhang said in a FinanceAsia interview last year. “It just doesn’t make sense to sell.”

True to his word, Airwallex announced a partnership model with Visa in February 2020 - a far cry from the acquisitions that many of the startup’s competitors around the world has opted for.

Competition is stiff, mind. In Asia Pacific, Alipay’s suite of services for SMEs launched in 2018 is giving Airwallex a run for its money while the finance arms of Southeast Asian “superapps” Gojek and Grab have recently rolled out similar programmes.

Given that the regional market is a lucrative jackpot for the winner, it’s no surprise many names are playing in this space.  In Asia Pacific, B2B cross-border transactions accounted for 8% of all payments, earning $70.4 billion in revenue in 2018 according to McKinsey’s recent report on global payments.

In Europe, Airwallex faces well-known challengers such as London-based CurrencyCloud and Earthport; the former received funding from Visa in its $80 million January funding round while the latter was acquired by the credit card company in 2019.

Airwallex is also working hard to raise investment dollars. The Australian Financial Review and the Sydney Morning Herald recently reported that Airwallex is looking to find as much as $350 million in its next round of funding. “It’s very normal for the VC backed company to be fundraising almost all the time because the process itself is slow and it takes a long time,” Liu said on the subject.

The payments company closed its $100 million Series C funding round led by DST global in the spring of 2019, bringing total fundraising to $202 million and pushing the startup’s valuation into the unicorn club.

Closer to Asia

Airwallex also moved headquarters from Melbourne to Hong Kong in 2018 to support its bid for a virtual banking licence in the city, which was ultimately unsuccessful. 

“We don’t offer foreign exchange services in China, and currently the Visa cards are not available there either,” Liu noted.

Instead of going it alone, Airwallex has formed strategic partnerships with financial institutions in China to avoid competing directly in an already saturated market including the likes of Alibaba-backed online lender MyBank.

“We service our Chinese clients through a partnership model with local domestic institutions,” Liu explained. These include internet conglomerate Tencent, who was an early-stage investor in Airwallex and continues to hold a stake in the startup.

Business (not) as usual

What SARS was to online retailers in 2003, COVID-19 could be for virtual banks and online payment platforms in 2020 as self-quarantining measures keep customers out of brick-and-mortar banks and stuck indoors.

“You can create a virtual bank account number quite easily as opposed to doing all these procedures at the bank,” Liu said. 

“For payments, we need business registration and we must verify the business owner. What’s different is that all these things can be submitted online.”

This system isn’t perfect. Airwallex tangled with the Hong Kong authorities in the fall of 2019 after police froze $18 million in company funds after allegations of payment fraud came to light.

If companies like Airwallex are to thrive they will need to ensure they can navigate the complex world of payments regulation and compliance, pick the right financial partners to work with, and now, it seems, also pandemics.

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