Fintech unicorn Airwallex raises US$200 million capital in US expansion plan to compete with Stripe
Fintech unicorn Airwallex has raised US$200 million to finance the roll-out of its payments platform across the United States early next year, a move that could see it clash with San Francisco-headquartered giant Stripe.
Investors such as venture capitalists Square Peg and Skip Capital, the investment firm of Kim Jackson and Atlassian co-founder Scott Farquhar, crowded into the fundraising once it became clear that Airwallex was growing revenues through the coronavirus pandemic.
The pandemic has inflamed investors' love affair with financial technology as the shift from traditional banking to digital payments has accelerated. Airwallex's capital call comes as a rush of fintech companies list this year, including Ant Group in Hong Kong and Shanghai, Lufax in New York and JD Digits in Shanghai.
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Stripe is still holding its cards close on the timing of its IPO, but was last valued in a private fundraising round at about US$36 billion.
"Businesses are now racing to embrace digital transformation at an unprecedented rate. We are more certain than ever that the digital economy is going to be the centre of the world's economic structure," Jack Zhang, chief executive officer and co-founder of the start-up, which is based in Hong Kong and Melbourne.
Jack Zhang, founder of Airwallex, is planning an assault on the US market. Photo: Handout alt=Jack Zhang, founder of Airwallex, is planning an assault on the US market. Photo: Handout
Airwallex extended its Series D fundraising for new and existing investors, which added US$40 million to the US$160 million that the firm announced in April. The round pegged Airwallex's valuation at US$1.8 billion, according to a person familiar with the matter, and brings the start-up's total equity funding to over US$400 million.
Airwallex has already established a beachhead in the US, the world's largest financial market. It has hired a team on the ground, established partnerships with US banks, and plans to use its office in San Francisco as a launch pad to roll out its payments platform early next year.
The firm has already secured money transmitter licences in 20 US states and expects to have the paperwork completed for more by next year.
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It does not expect to compete head-on for domestic US business with Stripe but will be making a bid for US cross-border payments.
That is not to say Airwallex isn't pushing on other fronts, including building its banking network across the Middle East, Eastern Europe and Africa. Its recruitment drive is on full throttle, and it has added more than 140 staff in the first half of the year, with over 100 roles still left to fill. Airwallex is also pursuing licences in Japan and Malaysia.
Generally speaking, financial regulators require start-ups to open an office in their jurisdiction before granting e-money licences. The firm now has offices in Melbourne, Hong Kong, Shanghai, Shenzhen, Beijing, Singapore, London, San Francisco, Tokyo, Kuala Lumpur, Amsterdam and Bangalore. It also has a representative in Dubai.
Airwallex, which seeks to enable low-cost and fast international collections and payments, mainly in the business-to-business arena, has witnessed a sea change in companies' attitudes towards the digital economy this year.
The firm reported more than a 50 per cent increase in its global customer base and said its net revenue has risen by over 100 per cent in the third quarter from the second quarter. It is on track to hit its goal of a US$100 million gross profit by next year.
Some industries have thrived during lockdowns such as e-commerce, logistics online education and video streaming. In contrast, others have slumped including travel and international student tuition payments, said Zhang based on analysis of payments made via Airwallex.
Airwallex, whose clients include China's JD.com and Tencent, has added a new revenue stream in recent months, helping manufacturers make digital payments to their international distributors.
Airwallex was founded in Melbourne during 2015 by Zhang and four partners with money from Tencent, Li Ka-shing's Horizons Ventures and Indonesia's Central Capital Ventura.
Since then it has knit together an international payments network that bypasses and dramatically undercuts Swift, the dominant messaging correspondent banking network for money transfer instructions, and is layering on treasury products and services, such as virtual multicurrency debit cards with Visa.
The value of instant payments, where transactions are completed within 10 seconds, will hit US$18 trillion in 2025, up from US$3 trillion this year. This would represent 17 per cent of all money transfers by value in 2025, according to a study from Juniper Research released on Monday.
Seventy-five per cent of Airwallex's customers plan to continue to use the digital channel post-pandemic, said Zhang at "Digital Trade in a Post-COVID World", a virtual briefing organised by the South China Morning Post and the World Economic Forum earlier this month.
"The speed of e-commerce is being accelerated - probably what happened in a decade happened in a couple of months," said the 35-year-old Zhang, who is an Australian citizen and Hong Kong resident.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.
