Airwallex CEO and Co-Founder Jack Zhang — empowering businesses to grow beyond borders
In today’s episode, Kailee Costello hosts Jack Zhang, the CEO and co-founder of Airwallex.
Airwallex is a fintech company that revolutionizes the way that businesses operate globally. Their financial infrastructure provides a modern tech stack for businesses of all sizes to operate internationally without the challenges of the current global financial system. Airwallex recently raised an extension to their Series E round at a valuation of $5.6B.
Tune in to hear about:
- Airwallex’s growth story
- How Airwallex built their global money movement infrastructure
- AI opportunities Airwallex is pursuing, including using LLMs to improve KYC and onboarding processes
- Why Jack does not expect crypto to play a significant role in cross-border payments
In today’s episode, Kailee and Jack discuss:
- Overview of Airwallex and what inspired Jack to found the company
Jack: Airwallex is the global financial and payments platform. It empowers a lot of the global businesses to grow beyond borders. We provide products from payments and collection, FX and payout all the way to embedded finance to allow or empower any businesses to operate the whole financial and payments stack on top of our platform.
Larger businesses, ranging from SMEs to enterprises, leverage Airwallex for global payments, collections, and payouts at scale through our API. If you operate a software, marketplace, or platform business and aim to integrate payments seamlessly, fintechs like Rippling, Brex, or ZipHQ use Airwallex for this purpose on a global scale. Companies such as TripAction and Navan utilize our infrastructure to power reimbursement products worldwide via our core API.
We started the company in 2015. At the time I worked in the investment bank on the trading floor for about eight years, and also at the time I invested in a coffee shop with my friend. My friend was actually operating the coffee business and we were looking to expand the business and so we were importing a lot of the raw materials around the world. Making payments, it’s very expensive and inefficient. It’s also very slow. And we thought there must be a better way of making payments cross-border. That’s how we started the business initially. So instead of building the coffee shop, we resigned from our job and started the company.
On business accounts, we offer bank accounts, corporate cards, employee cards, global transfers, and BillPay. Our core API enables scalable operations, allowing tasks like issuing thousands of cards or paying tens of thousands of people globally. In embedded finance, we focus on three use cases: payment for platforms, embedding money movement into core products (global treasury), and enabling startups to build global or domestic banking products.
- How the Airwallex team build their proprietary global money movement infrastructure
Jack: We initially built FX and payout infrastructure by integrating with local clearing infrastructure in every country. We obtained licenses locally, usually regulated by the central bank, partnering either directly with payment schemes or with local banks. Our goal was to access local payment networks directly, avoiding intermediaries like SWIFT. Our infrastructure enables us to operate fast and conveniently, completing most transactions within seconds, even cross-border.
Later, we expanded to local collection by issuing bank accounts worldwide. Airwallex can now issue bank accounts in about 63 countries in real time. This eliminates the need for physical presence to collect funds locally. We also extended our infrastructure to include online credit card payments and card issuing, leveraging the Visa network globally.
- How Airwallex’s customer base has evolved over time.
Jack: E-commerce, technology companies, and digital-enabled companies continue to form the majority of our customer base. However, we observe a growing trend where traditional businesses are increasingly adopting our products and services. Our focus has expanded to building software on top of our financial infrastructure, such as bill payment software and treasury management software.
As we continue to grow, our aim is to create fully vertically integrated software on top of our infrastructure to automate and scale our customers’ financial operations globally. This expansion has led to mid-market enterprise customers utilizing not only our infrastructure but also our software products for automating financial operations at a global scale.
- How Airwallex approached global expansion
Jack: Our approach to global expansion revolves around targeting advanced digital economies with popular cross-border transaction flows, considering both e-commerce and trade perspectives. Analyzing both supply and demand sides, we observe that many supply chains are concentrated in the Asia-Pacific region.
As these supply chains diversify globally, we adjust our footprint accordingly. For instance, we recently acquired a company in Mexico to empower emerging supply chain countries. On the demand side, regions like Australia, Japan, Singapore, Hong Kong, North America, and Europe represent advanced consumer markets with robust digital economies.
To cater to these markets, we build capabilities for online payments processing, offline collections through banking, and invoicing. We refer to these as operating countries, where we establish full-stack software and infrastructure products. On the supply side, our focus remains on payout capabilities, aligning with the shifting dynamics of global supply chains.
- Challenges faced in their global expansion
Jack: Building a global-scale FinTech like Airwallex poses significant challenges, especially operating in jurisdictions with complex regulatory requirements. Countries like China, Indonesia, or Malaysia, which are part of our extensive APAC operations, present challenges due to capital controls and intricate regulatory landscapes.
Language barriers also add complexity, given the diverse languages in Europe and Latin America. Addressing these challenges necessitates building a distributed and diversified team with local knowledge. On the technology front, compliance with data regulations, security, and data solvency requires distributed data centers in various countries, such as India or China.
For instance, GDPR compliance in Europe mandates careful consideration of data storage and privacy regulations. Operating a low-latency, highly distributed network demands strategically placed servers for quick responses to consumer payments. International expansion involves navigating a landscape rife with regulatory, linguistic, and technological challenges.
- Airwallex’s new generative AI tool utilizing LLMs for KYC and onboarding
Jack: As an integral part of the KYC and onboarding process, especially for businesses, there’s a need to conduct due diligence on the background of the business. Traditionally, this involves examining websites, social profiles, and delving into various databases worldwide to understand the credit history of the customer. However, one of the crucial aspects is comprehending the business profile through public information.
Large language models empower us to grasp these business models within context and scenarios. Before utilizing such models, a simple term like “champagne” on a website might be misconstrued as a platform selling alcohol. However, by leveraging large language models, we can contextualize such terms and gain a more automated understanding of the business. This not only reduces false positives but also increases the straight-through processing and automation percentage of the customer onboarding process.
This technology enables us to analyze the business of the customer through public profiles, bringing a nuanced understanding that traditional methods might miss. For example, if the term “champagne” appears on a website, the model helps contextualize it, preventing misinterpretation and ensuring a more accurate understanding of the business. This, in turn, reduces false positives and enhances the efficiency of the customer onboarding process.
- The future of cross-border payments, and the role that crypto and blockchain will play in this space.
Jack: I don’t foresee crypto playing a very significant role in cross-border payments, at least in a regulated fashion. Currently, our proprietary network processes over 94% of transactions over $100 billion, with less than 6% still going through Swift. Over 70% of these transactions are processed near real-time, offering a cost-efficient infrastructure compared to traditional wire or Swift networks.
From a speed and cost perspective, cross-border transactions are already remarkably fast and economical. We, at Airwallex, don’t charge SME customers any cross-border transaction fees, focusing instead on transparent FX fees. Cryptocurrency trading, on the other hand, presents challenges with liquidity inefficiencies and larger spreads compared to G10 currencies.
In essence, the existing infrastructure has already achieved a level of efficiency that is hard for cryptocurrencies to surpass in terms of both speed and cost. The cost-effectiveness and speed of our network, coupled with the challenges in crypto liquidity, make it challenging for cryptocurrencies to revolutionize cross-border payments.
While cryptocurrencies may find utility as alternative assets or for specific use cases like hedging against inflation, the fundamental efficiency of cross-border payments is already well-established in our current system. Therefore, I don’t see a compelling need for cryptocurrencies to play a prominent role in this domain.
Check out the Episode on the platform of your choice here: Spotify | Apple Podcasts | Soundcloud
—
About the Author
Kailee Costello is an MBA Candidate at The Wharton School, where she leads the Wharton FinTech Podcast team. She’s most passionate about how FinTech is breaking down barriers to make financial products and services more accessible — particularly in the personal finance space. Don’t hesitate to reach out with questions, comments, feedback, and opportunities at kaileec@wharton.upenn.edu.
As always, for more FinTech insights and opportunities to collaborate, please find us below:
Wharton FinTech: Medium Blog | Twitter | Our Website | LinkedIn
