Tencent leads US$13m funding round for international payments startup, Airwallex
TENCENT, the Chinese tech titan that boasts the popular messaging system WeChat and its integrated payments platform, WeChat Pay, is making a move into Australasia with a large investment in Melbourne-based cross-border payments startup, Airwallex, in an effort to diversify outside of its native China.
Airwallex closed an impressive US$13 million Series A round, led by Tencent, with participation from Sequoia China, Mastercard and other unnamed investors. Airwallex wants to expand its reach beyond its corner of the world into lucrative Asia Pacific and European markets. The company was founded in 2016 in response to the huge potential for profits and the high cost of cross-border transactions.
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Unlike transfer payment giant TransferWise’s customer-centric approach, Airwallex targets businesses, and gives them the capability to make and receive international payments at a lower cost and with more convenience. The business model is sure to be popular with Chinese companies, who are facing stricter capital controls imposed by the Communist government.
Since it first raised US$3 million last year, Airwallex has built up a large base of trading partners that will help them save customers’ money by providing low transaction fees and cheap currency rates. The company charges a transaction fee that’s taken out as a percentage of the total payment, but there are plans for a mass-payout option in the future.
“We’ve made settlement and reconciliation very easy, but our customers can also enjoy institutional FX prices to save a lot of money,” Airwallex’s CEO, Jack Zhang told TechCrunch. “We can access the most competitive pricing in the world to facilitate traditional retailers that don’t enjoy that sort of rate.”
Airwallex wants to take on the banks who have dominant control over the transfer payment market. Though the market is mostly saturated in other countries, especially China and parts of Europe, Airwallex believes their B2B approach can help differentiate them from their competition. An experience in purchasing takeaway cups in bulk gave Zhang the inspiration for his startup.
“We had ordered a big batch of takeaway cups from China because importing them was much cheaper than buying locally, but when it came time to pay the invoice I was shocked at how badly we were getting fleeced on the foreign exchange rate and fees,” Zhang said to Australia Financial Review back in 2016.
Airwallex’s services will be integrated with Tencent’s WeChat Pay platform, and has already seen backend costs fall, particularly among Chinese tourists abroad where the platform is dominant. However, Zhang said that for the moment the company mainly deals with financial institutions, insurance companies and other players who “do international payments at scale”. They have not ruled out working with other parties in the future.
“It makes sense to take strategic investment from Tencent because the WeChat ecosystem and WeChat pay is a big deal,” he added. “The internationalization will be interesting in the next couple of years, so we want to prepare ourselves for that expansion.”
The company is now available in several cities scattered across Asia Pacific, including Shanghai and Hong Kong, and will open new offices in London and Singapore in the near future. The largest number of transactions take place between China and Southeast Asia, and Australasian countries follow on. The company is planning on building its presence in Europe as well.
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