18th December 2021 – (Hong Kong) The Hong Kong start-up Airwallex has been valued at US$4 billion in its latest round of funding. Series E of funding raised US$200 million and brought with it a wave of energy and optimism over their future in the remittance, payments and currency industries.
Jack Zhang, CEO of Airwallex, claims that “From the start, our vision has been to build a global financial operating system that will allow modern businesses to operate without borders.”
It’s clear that Jack has ambitions of globalising Airwallex even more than it already has. “This additional capital enables us to scale our presence in North America, U.K., Europe and other new markets including the Middle East, South America and Southeast Asia, and become a dominant leader in global payments.”
Having been founded in 2015, Airwallex has grown very quickly. It may not yet be one of the best-known money transfer apps for HK, but it has vast ambitions – far beyond that of your average FX specialist.
What is Airwallex and how does it work?
Airwallex is essentially a business payments platform. Its mission is simple: “to create a world where all businesses can operate without borders and restrictions, and by doing so, propel the growth of the global digital economy.”
This makes sense, given that the pandemic has increased the interdependence between countries’ SMEs, with remote work and international business ever-expanding. Airwallex has currently built up a global footprint of 1,000+ workers across 19 different offices in 11 different countries.
Airwallex has been putting in a lot of groundwork with its infrastructure in order to meet the ever-changing digital needs of businesses. Through vertical integration, Airwallex provides banking services to businesses directly. Yet, they still facilitate a bunch of APIs that power a wide variety of tech products.
The banking part has had a particular focus on small to medium-sized businesses, because this is the larger market in terms of enterprise numbers, and have historically been undernourished when it comes to FX and payment solutions.
Airwallex, because of this innovative infrastructure that they’re working on, is able to offer highly competitive exchange rates. 0.5% to 1% above interbanking rate is the rate given to all businesses. The 0.5% ‘spread’ applies to the following currencies: USD, AUD, NZD, HKD, CNY, EUR, JPY, CAD, and SGD, whilst the 1% fee applies to other currencies.
Airwallex are looking to grow their own ecosystem. It’s not just about offering cheap foreign exchange, though this is important in a world where high street banks are undeserving their customers.
They’re taking great care in meeting the needs of offering APIs so that other companies can use them to provide financial services. This means that customers of Airwallex can use 3rd party financial services with more seamless integration, such as Xero.
Balances, deposits, global accounts, settlements, transactions, and many other data points can be accessed through the API, as well as executing payments. There are many other products that Airwallex offer for businesses, such as transactional FX that builds competitive FX rates into customer pricing and transactions, as well as treasury, payouts, and issuing solutions.
Economy concerns may favour Airwallex
There are a lot of concerns in the global economy, not least the US economy, which is suffering from high inflation and sluggish economic growth. The Fed is expected to leave monetary policy alone heading into 2022, which isn’t convincing in regards to inflation taming down, whilst the USD is forecasted to fall in value against the Euro and Canadian Dollar.
With such vast uncertainty among economies, this uncertainty is reflected in both currency risk and business confidence. In both scenarios, finding better payment solutions is vital. Businesses want to reduce receivables days, decrease transactional cost, improve the FX rates, and make dealing with business overseas less painful than it is in these uncertain times.
Whilst it may not play the biggest factor in Airwallex’s performance, a weakening USD and uncertain global economy could play into their hands. Earlier on in 2021, Co-founder Lucy Liu told Venture Magazine that “The hard work that we’ve put into date meant we were ready to support businesses looking to survive by taking advantage of the global economy—particularly through alleviating the pressures, hassles and cost of international banking needs.”
Airwallex appears to have a close eye on where the turbulent economy will trigger difficulties for customers and will seek to solve these problems. Plus, it appears as though lockdowns, restrictions, and casualties will never reach the heights of 2019, and so there is a race to fulfil this rapid growth of international business payments.
The Xero integration of Airwallex sums up what the company is trying to achieve with its ecosystem. Xero is one of the most widely used accounting software across the world. The cloud-based accounting software is a core part of many SMEs’ financials, from New Zealand to the UK, it’s widely recognised by tax collecting bodies.
By creating seamless connections between the Airwallex banking account, the transactions can be fed into Xero, thus automatically being accounted for with very minimal maintenance. In fact, multiple currency accounts can be synced to a single Xero account, making it incredibly easy to account for companies dealing in multiple currencies. Many SMEs will not be particularly experienced in multi-currency bookkeeping, and so it’s an important solution for small teams.
The amount of time saved from such 3rd party integrations would be worth a lot of money in saved opportunity cost and labour costs. However, Airwallex offers most of its business solutions for free in regards to having no subscription costs – they’re simply run mostly on transaction fees.
“The Xero integration enables SMEs to view a daily update of their transactions through their existing Xero bank feeds. Plugging into the existing solutions that businesses already use is a key priority for us; businesses now operate with an increasingly integrated arsenal of software, and we are here to make sure Airwallex fits into that”, stated Liu in the Venture Magazine interview.
“We aim to become the financial cloud for businesses in the new digital economy. To deliver on this ambition, we will continue to accelerate our trademark execution velocity in product innovation, infrastructure, and geographical expansion, all the while ensuring we continue to deliver outstanding customer experience.”