- 2 days ago
Slow, expensive, fragmented banking systems are holding SMEs back. Cynthia Ng speaks with Airwallex Southeast Asia Expansion Head Andrew Chim on building a faster, borderless alternative.
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00:10Hello, you are watching Awani Review. My name is Cynthia Ng. Global fintech Airwallex has just
00:15recently secured its full regulatory credentials from Bank Negara Malaysia. So it is no longer
00:21just a payment gateway. It is positioning itself as a borderless alternative to corporate investment
00:28banking. Now joining me today is Andrew Chim. He is the head of Southeast Asia at Airwallex.
00:33Thank you so much for coming on the show. Andrew, let's start with the big news. Airwallex has been
00:39around in Malaysia since I believe was 2022 but recently secured its e-money and Class A licenses
00:45from Bank Negara Malaysia. Can you walk us through what does this mean? What can a business owner do
00:51today that they can't do before Airwallex has secured those important licenses? So before we
00:58had the Class B license and a merchant acquiring license so we could help companies collect and
01:04pay out but with the new licensing we can allow companies to access all the functionalities of
01:11a global platform from one dashboard, one account. What that means is that they'll be able to open
01:17accounts in US, UK, different markets through the single platform so they can hold the balances in
01:24different currencies in a global currency multi-currency e-wallet. In this account they can do global
01:31collections, they can do global payouts and it'd be like connecting to local payment rails in those
01:38countries where the settlement time is a lot faster. They'll also be able to use our corporate debit cards
01:45to spend out of the balances in their global e-money account. For example, if they have Hong Kong dollars
01:50in the global
01:51e-wallet, they'll be able to spend using the card issued by Airwallex in Hong Kong using the Hong Kong
01:58dollars. Therefore,
01:59they do not incur any FX fees which you would do when you use let's say your own credit card
02:05to spend in Hong Kong.
02:07All right, just to be clear for our viewers, does it mean that Airwallex now accept Ringgit as a currency
02:12base?
02:12Yes, yes, so Ringgit is now one of the currencies in the global account. So let's make this more concrete.
02:17Let's say I am a factory owner in Muan, Johor. Does this mean now that Airwallex can handle everything
02:24from paying to a supplier in China and Shenzhen and collecting in USD and then cashing out in Ringgit?
02:31How does that work? So we are connected to more than 160 different local payment methods across the
02:37globe. Not just to banks, but also to payment methods. For example, GCash in Philippines. Now
02:43in Philippines, for example, many of the population are not banked because they do not have sufficient
02:48income to open a bank account, right? So they would use GrabPay, GoPay, GCash in these markets.
02:55Because of our connection to both the banks as well as local payment methods, we do allow our customers to
03:00access these payment rails across the globe, which makes their life a lot easier because you can
03:05do it from one single platform. I hear you from the tech and convenience perspective and the access.
03:11But for the skeptic watching this right now, many of Malaysian business owners have a 20,
03:1830 year relationship with their local banks, which have physical branches, right? So why would they trust
03:24a 10 year old app over a legacy bank? Yeah, I think it's a very interesting question. So banking is
03:32based on trust, definitely, right? And I think Airwallet is compliant under Bank Negara regulations.
03:39In fact, the e-money and e-wallet kind of regulations in Malaysia are relatively strict. For example,
03:46all of your money in your global currency e-wallet have to be safeguarded by funds from Airwallet in a
03:53separate trust account. All of your money is in a dedicated account with Malaysian banks licensed
04:00by Bank Negara, right? So there are very strict regulations involving e-wallet and e-money issuing,
04:07which governs Airwallet. Airwallet is fully compliant with that. We also comply with 80 different
04:13licensing requirements in global jurisdictions around the world. And we not just have to follow the local
04:19regulatory requirements, but we also have to comply with, say, U.S. requirements that cut across the
04:25borders of the U.S. and actually touches on how you move USD across the world. So our regulatory and
04:31compliance framework is very extensive and well developed. All right. So just to add one layer to
04:36that, because this is a big one. Local banks are protected by PIDM, which is government insurance.
04:41If the bank goes bust, the money is safe. Airwallet doesn't have that PIDM coverage, right? So how do you
04:47convince, let's say, a cautious SME owner that their capital is safe with you? This has to do with the
04:55trust account set up under the e-money kind of licensing, where all the funds in your global account have
05:04to be
05:04safeguarded in Malaysian Ringgit in a separate trust account, right? And therefore it's fully covered,
05:12right? The funds in your wallet are fully covered by the funds in the trust account, which Airwallet has
05:17to top up if it doesn't cover the full amount in the e-wallet, right? So on a one-to
05:24-one basis,
05:25all of your funds are covered in the trust account. Okay. Now in global trade, we know that things go
05:31wrong sometimes at odd hours, right? So let's say, um, if I go to a normal bank, I have someone
05:36that I
05:37could call up at maybe not 2 a.m., but at least like 8 a.m., you know, something has
05:41gone wrong. Can
05:42you help me? Can a customer do that with Airwallet? Do you have a presence in Malaysia, a physical presence
05:48in Malaysia? Yes. We just moved into our new office, uh, in Moku 3, uh, at KL Eco City. Uh,
05:55we have a very
05:56large local team in Malaysia. Uh, we expanded our headcount by 66% last year. We now have space for
06:03160 employees in Malaysia, uh, and we're going to double the headcount in, uh, 2027, right? So we have
06:11a very strong local team to support Malaysian SMEs who have problems, uh, uh, you know, for example,
06:16they're trying to make a large deposit. There's a request for more information. Um, they have a local
06:22account manager to help them, guide them through the process, uh, and to also expedite it. Um, so we
06:27have local, uh, sales reps, uh, business development reps to basically, uh, work with the transaction
06:32management team, work with the KYC team, uh, for different processes that may be taking a bit longer
06:38for documentation reasons. Okay. That's great. Um, but, uh, who exactly is your target client,
06:44right? Because is Airworks going for the, uh, old school traditional manufacturer, or are you looking more
06:49into, um, you know, the tech startups, the digital sellers that maybe perhaps the current, uh, legacy
06:56banks have failed to serve or have yet to be able to serve them? Yeah, I think, um, different companies
07:02have different pinpoints, but we, we want to serve a broad suite of companies. Um, so let me give you
07:08a bit of the breakdown of the pinpoints, right? So the, the pinpoints with traditional banking would be
07:13around FX fees. So there are a lot of hidden FX fees beyond just the transaction fee. Uh, the spread
07:18can be
07:18between one to 3%. Uh, and then it takes about three to five days to move money by the traditional
07:23swift system. Uh, for example, if you're transferring money to us, uh, it takes three to five days to
07:28settle. So we, we try to fix, uh, their pinpoints and solve their pinpoints from both a cost perspective,
07:34as well as a settlement time perspective, as well as a coverage perspective, because they will get
07:39access to different local accounts globally in more than 80 different jurisdictions, right? So this
07:45applies to all companies, not just digital companies, right? A travel company, for example,
07:49you know, um, let's say they do travel bookings. They don't really have a strong digital presence,
07:53but they do inbound travel and do outbound travel. So they work with operators all around the globe,
07:59uh, as partners, right, to bring in clients and also, you know, book experiences globally. So they
08:05will have a lot of international collections and international payouts, right? So they will work
08:09with the traditional banks, but each time the swift fee is pretty high and the FX fee is pretty high.
08:13So this would be an example of traditional company, travel agencies that have been around for
08:1850 years. Then you're talking about like digital players, for example, e-commerce and gaming.
08:23Gaming, you know, they, they would actually have to ship their game to app stores, uh, all around the
08:29world. Uh, they will have to spend on, uh, Google ads, meta ads to drive the adoption of the game
08:33in so many different markets, right? So having a, uh, very good checkout experience, uh, having a strong
08:39payment gateway solution, having good effects will allow them to save a lot of cost. And then for
08:44the e-commerce guys, um, definitely they would need a very stable checkout integrated with Google Pay,
08:49Apple Pay. One click, it doesn't, you know, move you out from the website into a different landing page,
08:55right? So it's native within the website. The experience is the same and this increases the
08:59conversion efficiency. Now you have outlined, uh, many different sort of services that you are offering,
09:04but, um, who is your initial target here? What are the customers that you're looking at? Because if
09:10you look at the reality on the ground, many Malaysian SMEs, they are still, are lacking in
09:15terms of digitalization. Many of them still do their accounts audits over WhatsApp or Google Drive.
09:20So how are you going to convince them? Uh, I, I think, um, it depends on the pain level at
09:26that point
09:27in time, right? So some SMEs are more ready to adopt because the pain level has reached a point
09:32where the system is breaking down. What I mean by that? So let's say I'm in two markets right now.
09:36I want to expand to 10. Oh, now your problem is the complexity of having bank accounts in 10 different
09:42countries. That becomes a huge pain. Whereas if you're just managing one to two countries,
09:47it's a small pain. It's a bit like my own experience in entrepreneurship, right? As you expand more and
09:52more to multiple markets, the complexity level doesn't increase linearly, increases exponentially.
09:57And then you have to do expense management across many different markets. How will you control for fraud?
10:02For your employee spending is all these different markets, right? So I would say different companies
10:06are at different levels of the expansion. The companies that have the most complexity and
10:10pain points across many different use cases will be the most likely customers to onboard quickly.
10:16Okay. But we want to target all the companies that can benefit from Airwallex, right?
10:20But the speed of adoption does differ depending on the level of pain. Okay.
10:24Yeah. Now, um, this brings us to the math because you have pointed out that
10:29Airwallex is famous for having very low, low FX rates. If you aren't charging the high fees that
10:37banks currently do, how do you pay your bill? Because is there a catch? I think for businesses
10:42wanting to know, is this all could be too good to be true? Yeah. So in 1970s, I think our
10:49co-founder
10:49had an interview on CNBC where he explained what Airwallex is. So in the 1970s, the Swift system was
10:55developed based on a legacy infrastructure, right? And because it's built on legacy infrastructure,
10:59the cost of that technology is actually higher, the fixed cost of it, uh, and also the maintenance
11:04of it, right? When you build on a new payment rails that's based on modern code and modern technology,
11:10actually the cost is lower. And then as you scale globally, uh, you work with the different financial
11:15partners, you work with the different banks and Visa, Mastercard, and so on. And as your volume
11:20scales up, so in the last 12 months, we have done $260 billion USD in transaction volume. As that
11:27scales up, you can negotiate better and better rates with the different partners and you can pass
11:32on the cost savings to the SMEs. So savings from being more efficient and okay, having scale of
11:38economies. So I guess then my next question is, uh, is the end goal here? Um, what is this? Is
11:43this a
11:44volume play or does Airwallex intend to become a full scale lender in the end? What's the vision here?
11:49I think definitely we're looking at, uh, expanding our product suite to companies. Um, lending is
11:56definitely, uh, something that we look at, uh, in terms of rollout across different markets. Um, I think
12:01it depends on, uh, the prioritization of product development across the globe and different markets
12:07will have different requirements and also regulations, right? Uh, so definitely our goal is to be the modern
12:14version of a bank in a digital format serving SME clients across the globe. If you look at some of
12:20the large regional banks, um, not going to name names, but they are also expanding their, uh, services
12:26and they are coming for FinTech. It used to be maybe the other way around, but they are catching up,
12:32right? So it's Airwallex here to, to provide the services while the banks catch up.
12:40What's the play here? Yeah, I think it's competitive in every industry. So when I was in e-commerce,
12:46it's very competitive because the retail players, uh, in the local markets are trying to provide a
12:51digital channel, digital format of shipping products, say supermarket products as well. So
12:56in every industry, there will always be challenged from the traditional players as well as the new
13:00players. So at Airwallex, I think our goal is to serve customers better, right? And we start from that
13:05fundamental kind of baseline, right? What are the pain points of the customers? How can we serve you
13:11better, right? How can we give you a single dashboard across multi-country operations?
13:17I won't comment on the competitive landscape in terms of what others can do, but what I know is
13:23Airwallex is fast and we're very customer focused. Okay. So as the customer evolves, we will evolve.
13:28Okay. Right. And let it be what, what it, what it makes sense. Uh, everyone says they are faster,
13:34they are cheaper, but can you give us a real number? Let's say if I'm moving one hundred thousand
13:37ringgit, um, how much time and actual cash am I saving compared to me transferring the money over
13:43an actual bank? Yeah. So if you use Airwallex, uh, for example, you're trying to move a hundred thousand
13:50USD, right, from your bank, uh, from your global account to a supplier in the US, um, because of a
13:57connection to
13:58the local payment rails in the US, the speed of it is equivalent to same day or in a matter
14:04of minutes
14:05and seconds, right? Whereas if you're trying to move a hundred thousand USD from a Malaysian bank
14:09to a US bank, it's going to take three to five days by SWIFT. Uh, so you can see your
14:14global account
14:15as being locally connected because each of the accounts are actually, uh, designated bank accounts
14:22in each, uh, locality and each country that you have access to. Okay. Thank you for that. Now,
14:27a lot of people can move money for, for cheap and, but moving money is the easy part. How is
14:32Airwallex,
14:33uh, also supporting businesses in other areas that are you integrating some of the services into,
14:38um, accounting, payrolls and things like that? Is that something that you're offering right now?
14:43Yes. Uh, let me give you two examples. So Whimsie Go, uh, which is a famous, uh, Malaysian brand,
14:47uh, when they were using, you know, their previous, uh, kind of payment gateway,
14:52a redirected customers from their website into another, uh, landing page. And this increased
14:58the friction to conversion, right? So the checkout, uh, and the drop off rate, uh,
15:02checkout dropped and the drop off rate was pretty high. When they moved to using, uh, Airwallex native
15:07checkout within their own website, the conversion rate increased by 35%. And when they did, uh, uh,
15:14integrate, uh, with Airwallex, right, uh, for payment refunds, for example, it used to take seven to 10
15:19days to manually reconcile, but with Airwallex, it was all done in the same day. So they saved seven
15:25to 10 days of manual reconciliation. So these are all the ways that we can help, uh, the clients.
15:29And now on the accounting side of things, uh, for example, I use the Airwallex card for my own
15:33travel expenditure. All you need to do is to take a photo of the receipt using AI. It scrapes the
15:40data
15:40in the receipt to auto-populate the fields, for example, the merchant name and, uh, perhaps even the
15:46category. So it takes two clicks to select the category and then submit, right, for you to file
15:50your expenses and all the expenses can be consolidated in one platform for the CFO to take a look.
15:56Okay. And there are also, uh, AI-powered fraud controls to spot, you know, potentially fraudulent
16:00transactions by employees, right? So these are all the technologies available to Airwallex customers.
16:05Well, thanks for illustrating, um, those examples. Okay. So, um, when you are in a room with, uh, SME bosses,
16:11right, uh, besides the, um, the pain point in FS margins and also speed, what are some of the
16:16biggest headache that they face that you think that Airwallex can come in to help solve?
16:21Yeah, uh, it's a good question because I'm also a SME boss, uh, myself. Um, oftentimes payments is one
16:28of the frictions is one of the frictions to launching a new market, right? Uh, so as I was starting
16:34my
16:34business in Bangkok, you know, I had to start a bank account to open a bank account. It took me
16:38four
16:38weeks to open a bank account and it takes two years to get a bank debit card, two years, right?
16:43And it took another four weeks to get a pause terminal, right? So I was losing customers because
16:47a lot of the tourists in Bangkok, they need card solutions and pause terminals. Um, I was having
16:52struggles to spend, you know, on Google ads, right? So I had to use my own personal card and then
16:57reconcile the expenses because I paid in SGD, but I have to claim back in Thaibat. So it's very, very
17:02painful. So I would say, um, for, for businesses looking to launch in different markets, the process
17:09of actually opening a bank account is very troublesome because the bank officer will need to
17:13visit your premises and you will need to get a rental agreement before you get a bank account,
17:16which is very counterintuitive. If you think about it, I have to spend money to pay for the rental
17:22before I can open the bank account. So where does the money come from? Usually it comes from other
17:26accounts, personal accounts, director's accounts, and so on. So it's hard to reconcile.
17:30Okay. So this is a problem that is not unique to Malaysia, of course. I see a lot happening among
17:35businesses. Um, just to get a sense of the priority, uh, you look at all of Southeast Asia,
17:42excluding Singapore, where does Malaysia rank for you? Um, are we just a small growing branch or do you
17:50actually see Malaysia as an engine of growth for Airwallex? Malaysia is definitely one of the core
17:55markets in Southeast Asia. I think that's why Airwallex started first in Malaysia, outside of Singapore.
18:00Malaysia, if you look at Hayes Malaysia's report, uh, Malaysia ranks very well in terms of talent
18:05competitiveness from a cost standpoint, as well as a, you know, um, multilingual, uh, being able to
18:12speak proficient business English. Uh, that's why many of our operations team and finance team sit in
18:17Malaysia, serving regional finance, regional ops, right? We have more than 160 employees in Malaysia,
18:23right? Um, and you can see that, you know, in the SME industry as well, many professional services
18:28firm, firms that serve say US customers, Singapore customers actually sit in Malaysia for regional
18:35finance, regional HR and so on. Um, so definitely we see Malaysia as a very important, uh, very important
18:42part of the Southeast Asia strategy. And you're looking to double your team this year. Yes. What kind of
18:46jobs are you creating? What kind of talent are you looking for? Yeah. We're creating, uh, all kinds of
18:52jobs in various functions, uh, ops, risk management, finance, business development, commercial team as
18:59well. Okay. Is it hard to find, uh, people who understand both tech and banking at the same time
19:04or more so tech less banking? I would say the digital economy in Malaysia is relatively developed,
19:11especially after COVID. Um, so I think the minister, um, actually said that 30% of the economy will be
19:16digital by 2030, right? That's the aspiration. Yeah. Um, so based on my experience working in Shopee,
19:22Thailand and Vietnam, and then TikTok in Thailand, I would say the, the relative development of the
19:27digital economy in Malaysia is very well, very well developed. Uh, for example, a lot of the transactions
19:32actually happened by, you know, um, uh, QR code, right? So, so the, the transition from cash to QR code
19:39has happened rapidly. Uh, and then we see a lot of, uh, rapid growth in the, in the tech industry,
19:46in Shopee and TikTok shop and so on. So I would say Malaysia is relatively advanced and well developed.
19:51So it's not that hard to find the tech and banking talent because banking has always been a very strong
19:56sector in Malaysia. There's a lot of strong tech players as well in Malaysia. So the talent pool is
20:01relatively strong. And now speaking of Shopee, TikTok, of course, you, you used to work in this
20:06e-commerce and social media platforms and, and coming from that background, on top of that,
20:12you founded a few GP clinics, uh, in Singapore and Thailand. So, um, quite an eclectic mix of, uh,
20:18experience that you have. Um, how does that help you or inspire you in the way that you lead
20:24Airwallex for Southeast Asia other than Singapore? Yeah. So as a business owner, um, having businesses in
20:30Singapore and Thailand, which are two separate brands and, you know, in Thailand, there's both
20:34products and services where I had to pay China suppliers, uh, for my tea brand, I would say I
20:40faced a lot of the pain points that the SME owners face when doing a cross border business, when paying
20:45China suppliers, when setting up a local bank account. So this actually inspired me in a sense
20:51that I find Airwallex's mission very compelling because as an SME owner, the last thing you want to
20:56worry about is the payments infrastructure. You have so many other things to worry about. I have
21:00to worry about which channel to do my marketing. I have to worry about the CAC, the cost of customer
21:04acquisition. I have to worry about the repeat customer volume, the churn risk. I have to worry
21:09about how to go to market, you know, top of the final marketing versus, you know, checkout. And it's,
21:15it's just so many things to worry about. So if we can take that worry away from you, you can
21:19really go
21:20and focus on growing the business. So when I speak to all these SME owners and entrepreneurs,
21:25they always say, thank you Airwallex because I have time and energy to focus on growth, right?
21:31If you don't grow, you're actually at risk, right? Because volatility can hit you anytime,
21:35hitting your business. So the way to de-risk your business is actually to grow. But when you grow,
21:41actually you increase your risk, right? So it's actually very counterintuitive, right? If I don't grow,
21:46I'm at risk of dying. If I grow, I also have a higher risk of dying, right? So having a
21:51partner
21:51like Airwallex to help you navigate through that difficulties, take your worries away from you
21:55in some respects, so they can focus on growth, really focus on growth. I think that's the perspective
22:01I can bring to Airwallex. Okay, that's great. Speaking of growth, apart from adding headcount to
22:07your team here in Malaysia, what is the growth target for Malaysia? Do you have a number in mind?
22:13I cannot share the exact numbers, but definitely it's a few multiples of where we're at right now,
22:18in terms of transaction volume. We do set very ambitious targets, of which I am also at the mercy
22:24of. But yes, definitely my ambition for Malaysia is multiples of where we're at. Are there sectors
22:30that you're particularly focusing on in the first few months, at least, since receiving the full
22:36licenses from Bank Negara? Yeah, we do have actually quite a lot of customers who were very keen to
22:42onboard Airwallex, but because we were not able to deal in million ringgit, so these are the customers
22:47that we can readily engage right now. And now they can. Yeah, now they can, right? So we're definitely
22:52interested in the travel segment. Okay. Travel has a lot of international collections, payments,
22:57use cases, FX use cases, e-commerce, definitely, the fashion brands, electronics distributors, and so on.
23:05We are very deep into the professional services space, marketing agencies, for example. They spend
23:10on behalf of brands in TikTok US, in TikTok Singapore, and so on. Gaming developers, right? They would
23:16actually have to launch the games in app stores all across the world, collect money in different
23:20currencies, pay their staff in Malaysia, and so on. So these are all the different types of businesses
23:26that would be, I would say, would find Airwallex a compelling proposition. Well, that's quite a journey
23:32that you are embarking on. So thank you so much, Andrew, for spending time to talk to me about
23:36Airwallex. And once again, congratulations to your team. Thank you, Cynthia.
23:51Thank you, Cynthia. Thank you.
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