TerraPay, a relatively new entrant to cross-border payments services, says it wants to expand rapidly throughout Asia Pacific by acquiring money-operating licenses in as many countries as possible.
The fintech achieved a $100 million Series B financing in 2023, and has used that money to quickly grow a team, going from 35 employees to over 700 since, says Shegashiri “Sukesh” Malliah, managing director.
Visa was among the backers of TerraPay’s funding, which was led by International Finance Corporation (the private-sector lending arm of the World Bank) and raised a combination of equity and debt.
License quest
It scored its first important regulatory win in April with a Major Payments Institution license in Singapore, which is the company’s headquarters for Asia Pacific.
“We like to go after licenses,” said Malliah. “Singapore is our first in Asia, and we’ll get more over the next 12 to 15 months.”
Payments may seem like a mature space for fintech, but it remains a fragmented industry, with many banks, fintechs, wallets, and digital platforms all looking for better solutions.
TerraPay launched in 2020 in the UK as the spin-out of an Indian technology company, Mahindra Comviva, that is listed in the Netherlands.
It caters to fintechs, banks, and wallets who need better tools to facilitate their own consumer- and SME-facing remittance and other peer-to-peer payment businesses. Its clients include Visa Direct, Western Union, Moneygram and Wise. TerraPay’s value-add is to let these bigger players offer services in any ‘corridor’, where the costs and hassle of doing business don’t scale.
“A remitter wants access to 120 countries, but no one can do that,” Malliah said, adding today TerraPay operates in 145 markets, a number he expects to reach 200 markets by the end of 2025.
Partner complexities
TerraPay provides a lot of the last-mile connectivity that other payment or fintech firms don’t want to deal with, as a means of embedding itself in bigger streams of business. Of course, operating in these niche places, with all the local regulatory, compliance, and market hassle, is expensive and time-consuming. This is why bigger players might be willing to integrate with someone like TerraPay.
But TerraPay has to bear those costs. Malliah says the company could be profitable, but it is reinvesting its profits into the business. He claims there is scale in building an infrastructure for the entire world so long as clients can integrate seamlessly to access the entire network.
But in most places, TerraPay itself has to rely on local partners. For example, in one of its most important markets, the Philippines, it liaises with five banks as well as wallets such as GCash.
Some of these are client relationships, but without a local money-operator license, TerraPay has to rely on partners to connect to the domestic payment infrastructure, or settle transactions in different currencies.
“You’re only as good as your partner if you don’t have a license of your own,” Malliah said. “We want to control the transaction.”
Finding use cases
A license will allow TerraPay to connect into local rails like a domestic bank or wallet provider. That will enable it to open bank accounts, settle transactions in multiple currencies, and eliminate the costs of working through intermediaries (such as reconciling transactions and ensuring compliance).
In the meantime, TerraPay is muscling into local markets by offering nitty-gritty, hard-to-do services on top of vanilla transactions. For example, it helps partners validate the names of payees.
Malliah cites the example of Vietnam, which has recently established the National Payment Corporation (Napas), which operates its local low-value, wholly digital payments network. The government is using the appeal of Napas to encourage more people to open a bank account (which is a prerequisite of using Napas).
But matching someone’s name to a bank account is not straightforward, especially as many Vietnamese share a handful of surnames. TerraPay’s software works on top of Napas and wallet transactions to match names and accounts.
Once the fintech creates a beachhead, it then finds other services. Another is foreign exchange. It provides FX through bespoke services such as card issuance. It offers one-time, pre-paid virtual debit cards that merchants or financial institutions can hand out to customers, particularly for cross-border uses – and then manages the FX piece, where it is licensed to do so.
Another area of expansion is pay-outs. Currently most of TerraPay’s work is pay-in, to help a bank or fintech’s customers receive payments from abroad. But TerraPay is building its own merchant acquirer network, to help small companies make overseas payments with an e-wallet.
There’s a lot of opportunity in the Middle East and Africa for this approach, Malliah said. “There’s demand in the travel industry, for example, to use a virtual card to book a hotel. The card is prefunded, so we’re not getting into the lending business.”
All of these activities – pay-in, pay-out, card issuance, FX – become a lot easier to manage and integrate if TerraPay can control all the moving parts. A license, such as the one it has in Singapore, lets it handle all of these functions. Otherwise TerraPay can only offer niche services (such as name matching) and grind out a value proposition while it waits for those licenses to roll in – and as it spends its Series B funding.
