Deal focus: Airwallex plots Asia payments expansion

When Michael Zhu, a managing partner at Gobi Partners, was contacted by the team at Airwallex, he was initially surprised. The firm was best known for investments in China and Southeast Asia; for an Australian online payments start-up to reach out for funding seemed counterintuitive.

On meeting the founders, however, things began to make sense. The team – a group of Chinese students based in Melbourne – needed an investor that grasped the headache of trying to transfer money to and from their home, and they had made little headway with the local investor community.

“They approached us because they felt like Australia, in some ways, is a very small country in terms of raising venture money,” says Michael Zhu, a managing partner at Gobi. “A lot of VCs didn’t understand the model either, because we have Unionpay and Alipay, and if you don’t go deeper you may feel like other people are covering those functions already.”

Airwallex has grown rapidly since that initial $3 million pre-Series A commitment by Gobi in 2016. The company recently achieved unicorn status with the closing of its $100 million Series C round, led by DST Global with participation by Sequoia Capital China, Tencent Holdings, Gobi, Hillhouse Capital, and others. The company now plans to take a lead role in the region’s enterprise payments space.

For existing investors like Gobi, the rapid growth of Airwallex speaks to the pent-up demand among financial services companies and internet businesses – particularly in China – for an alternative to clunky, costly traditional options like Western Union and PayPal. Airwallex is built from the ground up to be seamlessly integrated into the payment processes of clients such as JD.com, Ctrip, and Mastercard, tracking exchange rates with partner banks in real time to ensure the best rate is available moment to moment. Investors see the founders’ background as their biggest strength.

“Because they’re Chinese, they’re dedicated to the Asia Pacific region: they understand the customer better, and most of their existing customers are Chinese business clients,” says Zhu. “If an overseas competitor wants to go to China, it’s very hard to close a deal, by comparison. Their experience and their background are both entry barriers, and they’re going to continue to play a very big role here.”

There is plenty of open ground in Asia’s payments space for Airwallex to capture, but the company also sees a wide range of applications around payments where it can build out additional services – such as investment management and even mobile tourism apps. Its strategic backers, which include not only Tencent but also Indonesia’s Bank Central Asia through its VC arm, are expected to play a major role in this development.

“Tencent’s a great partner, not just a financial investor. They have WeChat Pay and there’s a big opportunity for their global payment network to collaborate with Airwallex,” Zhu says. “It would be good to get more traditional banking investors as well, or infrastructure players. Whatever resources we can add to the table would help the company grow in different ways.”

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• Topics
• Australasia
• Greater China
• Expansion
• Financials
• Technology
• Australia
• Asia
• Growth capital
• Gobi Partners
• Tencent
• Hillhouse Capital Management
• Sequoia Capital
• DST Advisors