Airwallex has added a second asset-management license in Asia, pointing towards the fintech company’s ambitions to become more than just a payments and FX provider to small businesses.
The company is looking to raise $200 million from investors, at a figure that would value the company at $6 billion, according to Bloomberg News. The company has already raised $900 million, including a Series E in 2022 that valued it at $5.6 billion.
The desire for more capital comes on top of new financial and tech services that are meant to position Airwallex as critical financial infrastructure, a sort of Asia-centered version of Stripe or Adyen.
Not a bank
At this point the company has not indicated the intention to seek a banking license, á la Revolut: it’s not as big or established, and no one at Airwallex has suggested this is the plan.
Besides, Revolut looked at a digital banking license in Singapore in 2019 and found the capital requirements too steep. It’s recently obtained a license in Europe. But in Singapore Revolut has begun to offer users access to US dollar-denominated money-market funds, managed by Fidelity International.
Nonetheless, a discussion with Arnold Chan, general manager for APAC and head of the company’s Hong Kong business, where Airwallex has now received an asset-management license, points to the company’s ambitions to embed itself in just about every other related activity.
The company was founded in Melbourne in 2015 to solve for making foreign-exchange transactions cheaper to facilitate cross-border payments. It moved its headquarters to Singapore in 2022.
New financial services
“We’ve evolved from just global FX transactions to offering a full suite of services to businesses of all sizes,” Chan said. “We’ve become part of the global finance and payments infrastructure.”
Airwallex expanded to providing small businesses with credit cards, then offering merchant acquiring services to e-commerce businesses, expanding from payouts to payment acceptances.
With all of these activities, more money can end up sitting in a customer’s Airwallex account. Airwallex is a fintech, not a bank, so it can’t treat those monies as deposits, and provide interest on them. One option could have been to become a bank. That’s a difficult, slow, and uncertain path, as Revolut’s experience shows.
Instead, Airwallex has begun amassing asset-management licenses, starting last year in Australia, and now adding one from the Securities and Futures Commission of Hong Kong.
Airwallex doesn’t actually manage the assets in its Yield program. It aggregates participating customers’ spare cash into an omnibus account held at a professional money manager. In Australia, Airwallex invests the money into a money-market fund run by J.P. Morgan Asset Management.
Chan says Airwallex may also work with the same firm in Hong Kong, but is reviewing alternatives. Regardless of the money manager, the customer data remains with Airwallex.
That service was initially aimed at SME customers. But in Australia this year, Airwallex also extended Yield to individual users, provided they invested a minimum of A$10,000.
Ambitions for 2025
Since launching Yield in Australia in November 2023, the company has amassed the equivalent of $100 million of assets under management. It charges a fee based on AUM, on top of whatever the underlying fund manager charges. Airwallex’s fees may change, but they need to be competitive, which means the customer needs to earn a return that’s higher than what they’d get from deposit interest.
Chan says Yield will go live in Hong Kong in 2025, and that the company is exploring other markets where it can follow suit. This could mean other developed markets in APAC as well as Europe or the United States.
“Over time, we want to offer the full suite of services in all major markets,” Chan said, provided it can obtain the necessary licenses.
Although Airwallex is borrowing a partner’s fund to offer a return on user cash, Chan says the company is building its own rails to enable this. Which is to say, customers access Yield through the Airwallex app, but they have to register for it separately, because money-management requires extra know-your-customer compliance.
Chan says the company is looking beyond ‘infrastructure’, to software services. The fintech considers itself more than a transfer service, a card issuer, or a provider of investment products. It wants to provide a complete service to SMEs and larger companies too, from expense management to supply-chain payments to billing.
“We’re growing quickly in markets like Hong Kong and Singapore because what we offer is comprehensive,” Chan said.
These new services mean Airwallex is going toe-to-toe with deep-pocketed players like Stripe and Adyen from the West and AliPay from China. These companies have the advantage of having bases in large single markets or areas under uniform regulation. Airwallex must also fend off regional competitors, such as established firms like Nium and newcomers like KPay. And now there’s a tier of digital banks of various flavors in many regional markets.
APAC has plenty of growth, particularly for SMEs, but it’s fragmented and costly, even for a tech platform. To compete, Airwallex will need to add more products, to expand into competitor turf – and to raise more capital, if it’s to Yield new gains.
