731. Focus: International expansion and the importance of local, with Pranav Sood, GM, EMEA at Airwallex

Airwallex bets owned infrastructure and local presence will win cross-border payments

Airwallex is building a cross-border payments company on owned infrastructure and local presence rather than a single global template. Its Asian roots taught it that every market differs, and a distributed team plus local rails lets it serve each one. In a tighter funding climate, Sood argues, owning the infrastructure is what gives a fintech defensibility.

Takeaways

• Airwallex treats each country as its own market. Coming from Asia, with many currencies, languages and super apps like Grab and WeChat, Airwallex plans for the UK, Israel or the Netherlands separately. Sood contrasts this with American firms that treat Europe as one rest-of-world region.
• A distributed company builds genuinely local businesses. Airwallex has executives in London and San Francisco and teams in Melbourne, Singapore and Hong Kong. Sood says this keeps it lean and agile, whereas leadership sitting in one office, as at GoCardless in London, makes local businesses harder to build.
• Owning infrastructure is the moat investors now want. Airwallex spent its first couple of years on licenses and scheme integrations, and 94% of payments run on local rails, avoiding SWIFT. Sood says investors now favour owned infrastructure and sustainable unit economics, and firms higher up the value chain will struggle.
• Airwallex has scaled quickly from a coffee shop problem. Founders running a Melbourne coffee business found Western Union and banks painful for paying overseas suppliers. Airwallex now has about 1,300 staff in 19 offices, roughly $50bn in annualized volume and over $200m in annualized revenue.
• Customers now scrutinize rails, banks and safeguarding. Since the SVB collapse, clients ask which rails a provider uses, such as Fedwire or ACH, which partner banks hold funds and where money is safeguarded. Airwallex uses five US sponsor banks for redundancy.
• A broad customer book carried Airwallex through the pandemic. Sood says Airwallex grew exponentially during the pandemic. Booming ecommerce customers offset slower travel customers such as Qantas, so the mix of sectors cushioned the business.
• Mass adoption is slow, so products must solve real pain. SWIFT took about fifty years to reach mainstream awareness, and debit cards overtook cash in the UK only about three years ago. Sood argues fintech products must tie value to a clear customer pain.