Part I: Intro to Global Payment Trends and Airwallex
Let’s jump right in. What is your background and what got you excited to join Airwallex?
I joined Airwallex two years ago after spending 11 years at Palantir Technologies, and am currently Airwallex’s Global Head of Product. Palantir was a wonderful ride from small startup to public company. When I came across the Airwallex opportunity, it was still in its first few years and the opportunity to join its journey to scale and exponential growth was not one to be missed.
Walk us through Airwallex’s vision and insights about how the world has evolved in the last few years?
The founders of Airwallex started a coffee shop in Melbourne, where they saw firsthand the challenges of importing goods and the friction around paying for those goods, for example, exchanging currencies on a low margin operation like coffee sales is very challenging. They pivoted quite dramatically from running a coffee shop to building a payments company to solve this for the many other companies that face the same issues.
Companies are increasingly operating globally and need to create a local experience for their customers and vendors to pay in their local currency to avoid extra costs and complex workflows. However, these companies do not want to deal with the hassle of setting up a banking partner in every region they operate and later the reconciliation across these partners. At the same time, financial infrastructure is becoming increasingly sophisticated, opening the door for new financial services and the boom of fintech. This includes more open frameworks like PISP (payment industry service providers) in Europe, and appetite from central and domestic banks to form stronger partnerships with global players. Airwallex brings all of these pieces of the puzzle together – operations, compliance, and reporting – to enable money to move globally with low cost and little friction.
The traditional banking industry is not set up to efficiently do cross border payments – they still rely on complex correspondent banking networks to execute a transaction. Can you walk us through the pillars of Airwallex’s product and how you found a way to streamline cross border payments?
We have a broad product suite, focused on enabling global financial services. The core and first pillar is multi-currency and regional account access. We support multi-currency funds holding, and payout and pay-in rails in 130+ regions. Airwallex users who have customers in different regions can hold currencies, receive funds and pay into accounts around the world all from their Airwallex account. Their customers don’t have to make a foreign transaction.
The second pillar is card services, which make it easy to spend from one place, using a multi-currency visa card. The third pillar is online payment acceptance, which enables our customers to receive funds through a payment gateway using Visa, Mastercard, Unionpay, Wechat pay, and more. The fourth pillar is platform offerings, primarily our connected account framework, called Scale, for which we support a network of connected accounts managed through a platform entity. An example would be an eCommerce marketplace where the funds can be made available in a way tightly integrated with the marketplace platform. They can accept payments in different currencies on behalf of merchants.
What were the biggest technical challenges that you had to overcome to make the product possible? What is the core technical innovation that you figured out early on?
We certainly had built a very robust foreign exchange engine early on. We work with various liquidity providers to understand the ways we can efficiently move money in a low cost way. Our founders had experience in FX trading, enabling us to take on a global rather than domestic solution from day one. It’s hard to retrospectively introduce a multi-currency product, rather than starting there.
Beyond this, we were able to build a robust platform of banking rails to minimize the hoops through different banking networks and integrate with all the local payouts systems that are near instantaneous. It takes a lot of time and work to set up all these rails and set up additional services like dedicated account numbers, direct debit services, and other payment facilitation. We also baked in region specific regulatory requirements and data privacy. One thing we figured out is how to store data in places where our customers are most comfortable.
A modern computer extracts away complexity, but also allows innovative products to be built on top of those complex features. The iPhone is a great example of this. Airwallex has built our financial service infrastructure in a very similar way – by providing a set of APIs that make it really easy to wire into this complex financial ecosystem.
Part II: Food for thought for Founders
When founders come to you, they’re probably facing a number of different problems they’re looking to solve. If you had to narrow down these problems to the top one or two challenges that companies are facing when they come to Airwallex, what are they?
Ultimately, you want access to the financial services that your customer expects in a low cost and low friction way. If you’re in the US and looking to onboard customers in the US or Europe or Hong Kong, it can be overwhelming to figure out how to access financial services in these regions in a compliant way. So the first problem is being able to easily access global financial services in one platform. The second problem people are facing are the high costs of going back and forth between currencies. For example, a company might receive USD into HKD via a payment gateway that only supports paying in one currency, only to eventually buy back USD to pay for local advertising. When you start off these costs might not be large, but when you start to scale it becomes more and more important to operate efficiently here. Finally, larger enterprise companies are looking to embed these financial services into packaged solutions for their own customers, which we also support.
When companies come to you, what are they typically doing to solve the problem currently?
Domestic banking is well supported, but multi-currency and easy migration between currencies is much less well supported. Many companies start by looking at how they expand regions one by one, but people realize very quickly that they should look for an easier way. Customers at this point expect these services to exist. They go out and look for these global products because they see them embedded in other services that they are using. This could be a global payroll provider wanting to make payments rapidly in many corners of the globe, or a share trading platform providing access to foreign traders to the NASDAQ or HKSE. We want to create lightweight ways for customers to start to embed with our systems.
When is the right time to start onboarding to a solution like Airwallex? When would you recommend founders that have global ambitions start to put this infrastructure in place?
I think all companies should be thinking about getting infrastructure that can help you scale not just domestically, but globally, from day one. Unnecessary friction and cost is going to creep up on you and hurt your margins. The friction of reconciling across different accounts is also going to be really high, and the time taken to figure out where funds are across bank accounts and countries at any given time is very hard. Doing less of this will reduce friction in overall business operations. It affects multiple sides of the business – from logistics to marketing to technology. It has become easier than ever before to set up financial services providers using APIs, and it’s never too late to switch.
How does Airwallex compare in functionality to other global payment solutions like Checkout.com and banking solutions like Novo and Brex?
There are many companies with global capabilities but focused on specific payment flows. Checkout.com is focused on online payments but enabling many payment methods. They have global support, but are focused on a specific payment flow. Stripe was an early pioneer in this space, but without this global focus. They turned something that was very complex into something very accessible – embedded payments on the internet. Checkout.com is taking this a step further and integrating other global payment methods that are critical to localize the experience for customers. Wise is also making global payments simpler, but for P2P transactions. What Airwallex is good at is providing global payment rails for any type of money movement between customers.
Are there any regulatory questions or considerations companies should make before expanding globally?
There are obviously a lot of regulatory requirements in the financial industry, and those requirements are going to differ between regions. Companies wishing to create a better customer experience by embedding financial services may find they don’t have the appropriate license to meet their goals. This is where Airwallex tries to abstract away that regulatory complexity and provide packaged services that are compliant and easy to integrate with. Licensing, transaction monitoring, and financial reporting are examples of services all built in.
Part III: Closing Thoughts
Do you have a contrarian opinion on how cross border business might evolve in the coming years and what opportunity is there for software companies to streamline it?
When you look at blockchain and digital assets, I think digital identity is going to become a really significant influencer in global business operations. Today, there is a huge overhead in verifying identity and monitoring transactions for fraud or malicious behavior. Credit cards for example are very well adopted globally, but have relatively weak security controls because they were not designed for the internet era, so a lot of additional overhead is spent verifying identity and handling customer disputes due to card theft. Verifiable digital identities, that tie the user or business to the payment method, would establish more trust and reduce friction in the context of global money movement.