Generating substantial buzz among investors, Melbourne based fintech Airwallex is well on the way to achieving its stated goal of becoming a multibillion-dollar major player in the global financial services network.

    Regulatory protection

    While Airwallex isn’t a bank, it is in many respects regulated like a bank, says its chief legal, compliance and risk officer Jeanette Chan. Strong anti- money laundering, anti-counter- terrorist financing and anti- fraud measures are crucial to its success and credibility. “We have lawyers and regulatory and financial crime compliance and risk officers covering every jurisdiction in which we operate, working as an integrated unit to maintain the highest legal, regulatory and compliance standards,” says Chan.

    An automated transaction monitoring system provides alerts based on changing customer behaviour and account activity. The monitoring can be tailored to new situations and compliance requirements quickly and efficiently. Customers are subject to comprehensive “know your customer” checks to identify potential red flags.

    “On a periodic basis, we review and assess our customers to ensure their business operations continue to comply with our policies and risk appetite,” says Chan. “Lastly, we work with trusted partners with a good track record in the financial ecosystem. These organisations help us provide faster and more secure cross-border payments for our customers.” 

    Businesses of all sizes are reaching into global markets as the internet and mobile communications allow them to attract and serve customers from all around the world. But for many of them, making and receiving payments across international borders is difficult and expensive. Australian fintech Airwallex is hoping to build a multibillion-dollar business addressing this issue in the next few years.

    “Organisations are looking to grow their business globally,” says Craig Rees, SVP platform business at the Melbourne-based fintech. “They don’t want to have to work with multiple partners in multiple different markets — that just adds complexity to how they run their business. We can be that one-stop shop.”

    Investors seem to share Rees’ optimism about the company, founded in 2015. A recent funding round valued the company at $7.6 billion and attracted repeat investment from organisations including ANZ Bank, Sequoia Capital China and Lone Pine Capital.

    Rees describes Airwallex as a trillion-dollar market opportunity, with space for several participants. “We believe there are a lot of partnerships available to us as we expand,” he says. “This is not a single-player-takes-all in a global market — a number of organisations will be successful over the next 10 years and Airwallex’s vision is to be one of these — to be a pillar in that global financial infrastructure.”

    Airwallex came about because Jack Zhang and Max Li were buying coffee cups and labels from China for a cafe they owned in Melbourne. They were importing the cups to save money, but discovered how expensive it was to make cross- border payments. The pair joined with friends Xijing Dai, Lucy Liu and Ki-lok Wong to establish Airwallex as an easier, cheaper way for small businesses to make international payments.

    Two key market segments

    Providing payment and banking services to help small and medium businesses run and operate their business globally remains one market for Airwallex. It provides businesses with bank accounts in different countries and currencies, to which the organisation can receive local payments and from which it can make payments. It also allows customers to create virtual payment cards, which can be used in multiple currencies, and will soon start issuing physical cards.

    When Zhang, a former software engineer at ANZ Bank, and his co-founders started the business, they were unhappy with the currently available technology and so built their own financial infrastructure, which forms the basis for Airwallex’s second market. It opens up its infrastructure to other businesses that want to use it to help their own customers transact and make cross-border payments. For instance, global payroll company Papaya Global incorporates Airwallex’s capabilities into its own website to allow its business customers to pay their staff in different locations around the world. Online broker Stake uses Airwallex to allow investors to buy stocks in Australia and the US.

    Rees is responsible for overseeing this second market. “There are SMEs just looking to operate their business globally and also those SMEs launching and building out their consumer propositions,” he says. “In both cases, it’s still incredibly difficult to gain access to that financial infrastructure to grow your business.”

    The company is catering to a fundamental shift in the business dynamic. “The world has changed — 10 years ago, the majority of your customers were in the same region or country as you,” says Rees. “Nowadays, we’re seeing organisations where their supplier is in one region, their customers are in a completely different region and they’ve decided to set themselves up in Australia or the UK where they actually don’t have a customer base. But because of the infrastructure Airwallex has been able to provide, we enable these new businesses that maybe 10 years ago wouldn’t have existed.”

    Airwallex partners with some 50 banks around the world and so has lowered the cost of entry to new markets for businesses, which no longer need to find banking partners and open local accounts. In November last year, the company raised $US100m from investors, which saw its valuation hit $US5.5b — a surge of US$2b since its previous capital raising two months earlier.

    Building the board

    The Airwallex board consists of strategic investors and financial investors from Asia, Australia and the US. The strategic investors also provide advice. “They are heavily involved in the fintech scene globally so can give us advice on how to find business strategy and operational efficiencies as we grow our business globally,” says Rees.

    Other investors are represented by board observers, who attend meetings to understand how the organisation is progressing. One board observer is Paul Bassat, whose venture capital firm Square Peg is an investor.

    While governance and oversight are important in a startup or scale-up business, the key role of the directors is to support the business, he says.

    “Our starting point and our mindset is how can we support? How can we add value? What can we contribute in a way that is going to hopefully help them build a business that becomes, over time, a really important business?” says Bassat, who was a co-founder of employment platform SEEK before he started in venture capital. “We understand that in ambitious, high-growth companies in the early stage, there are a lot of things that can go wrong. You need to be across those things, but you can’t be obsessed with them.”

    Bassat notes that in venture capital, it’s very rare to meet founder teams who “tick all the boxes” the Airwallex founders did. “You’re talking about a group of people who are incredibly bright, incredibly driven,” he says. “They had very good domain knowledge and really understood the problem. This isn’t like building some app for teenagers. These are difficult problems involving a lot of technical complexity, regulatory compliance, counterparties, risk and capital.”

    Quarterly board meetings are focused on the organisation’s strategy, how it is seeing the market, the performance in the quarter just passed and forecasts for the next three months, says Rees. The company relies on the board for advice on global expansion and how to enter new markets, including issues such as brand building and the competition.

    The board monitors how the company is delivering on its overall strategy and plan. It assesses what’s going on in markets where the company has deviated from the plan and reassesses the assumptions the strategy is based on. From there, it’s up to the executive team to execute board strategy — and it’s given a lot of autonomy on how that’s achieved. “As long as you’re clear on what success looks like and the objective, the ‘how do you get there’ should be up to the team to execute on,” says Rees.

    This is particularly important for a business like Airwallex, which has a global team spread across different geographic sectors, making phone or Zoom meetings and shared decisions difficult.

    “Gaining an understanding of what success looks like, the direction we’re going in, and then devolving responsibility and a level of accountability to the different teams to make those decisions and execute, is how we work with our teams internally and how we expect to work with the board externally,” he says, adding that alignment on objectives is critical. The dispersed workforce also informs the way the company conducts meetings — or even if it holds meetings in the first place.

    Communication strategy

    Rees divides internal communication into two parts: synchronous communication — everyone gets together for a meeting, discusses a topic and comes to a conclusion; and asynchronous communication — staff comment on an issue at different times. It’s part of the document-led approach the company adopted after executives foresaw the risk everyone would find themselves in Zoom meetings all day. When an issue comes up, instead of immediately calling a meeting, a staff member creates a document about the problem — its background and the different options and proposals. The document is shared with all the people who would normally have been invited to the meeting and they all comment asynchronously.

    “Over the space of maybe a week, you’ve got people commenting, asking and responding to questions in their own time,” says Rees. “Hopefully, that allows the group to agree on a route forward,” Rees says. “If they can’t and we call a meeting, that meeting is significantly more effective.”

    This approach allows staff to work in their own time zones and was particularly effective during COVID-19 lockdowns when staff schedules were thrown into disarray with working from home and juggling domestic tasks.

    “It was a critical step in how we became more successful,” says Rees, who joined Airwallex three years ago and previously worked at Atlassian, Vodafone, BCG Digital Ventures (the startup arm of Boston Consulting Group) and IBM.

    Future plans

    Airwallex is targeting $1b in annual revenue by 2025. Rees won’t reveal current revenue, but points to the latest funding round, when the company revealed third-quarter annualised revenue of more than US$100m following a 165 per cent year-on-year increase.

    Zhang has said he wants to turn the company into “the Apple of business finance” and “own the whole ecosystem” — to create a global ecosystem where Airwallex is connecting its SMB customers with its platform customers, banking and other partners. The goal is that everybody wins from that interconnected network, says Rees.

    But he cautions that while vertical integration is a great opportunity, businesses need to think about their strategic advantage — what will be their competitive advantage if they do something? And they must remember that sometimes doing everything isn’t the right approach.

    “Just because you’re successful in one stage of the value chain doesn’t mean you’re going to be successful throughout the full value chain,” says Rees. “You’ve got to work out where the value is and invest in that.”

    The company has two key strategic levers as it works towards its billion-dollar revenue goal.

    The first is geographic expansion for both the SMB business and the platform business. Airwallex already has a strong foothold in the Asia-Pacific and is looking to expand into the UK and the US, two locations where it recently launched its SMB offering.

    The second lever is expanding its product set. The business was founded with what it called its “global treasury and payment network”, which partners with banks to allow businesses to collect and hold revenue, convert it to different currencies and pay it out locally. Next it offered cards and online payments and might yet expand into other financial products such as loans.

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