Benevolent Disruptors
00:10:55 · Chris Corbishley
[00:10:55] S0: It's fascinating. Were actually in Boston yesterday with Sebastian Mallaby in conversation with Demise Asavas, used the exact same rationale as to why actually staying in London and not having the distraction or the competition of moving DeepMind, for example, into the valley where you're up against stiff competition, but also terrible distraction from the core mission. And so it's fascinating that kind this of profit engine is what's driven your success now in Europe, in The US, and your retention of talent. And I think one of the most impressive journeys, because I remember in 2019 when we invested, it was it was still in that early days. You'd really proven some incredible product market fit in payment corridors that otherwise were very difficult to execute in. I had moved into things like corporate cards, moved into payments. And, you know, what what was fascinating was just the speed of execution on the product and how quickly you were unlocking enormous TAM, enormous new product areas by just pure innovation. And again, I'd just be curious to know how you created that culture internally and been able to innovate on the product side so quickly. What's driven that?
00:12:03 · Jack Zhang
[00:12:03] S1: Yeah. I think partly it's driven by customer demand, right? So that when we build the infrastructure, when we build the business account on top of that, that we have customers asking, oh, you know, if you already help us managing banking and financial operation globally, can you also help us to managing my corporate card and managing my expenses and procurement reimbursement and all that? And, you know, we see a lot of our customers using Strive or Audient to process online payment, but when they're doing cross border online payments processing, they're 2%, 3% of that GMV on FX and then cross border settlement. And it doesn't make a lot of sense from a first principle point of view. So we kind of really see the problem. There's a demand of having a single platform to managing sort of the money in, money out, and also where the money is sitting and how they're managing the cash flow and treasury of that. Right? So there's like, there's obviously a first principle element, there's also sort of customer demand side. And also that we, you know, we talk about pivotal moment that it's very sort of important for the company. In 2019, we decided to obsolete, early twenty nineteen, we decided not to go down the path of setting the company to strive. And that is a very hard decision for us. Then we're basically thinking like if we decline this decision, we need to build a $1,000,000,000 company, right, to make the journey worthwhile. Otherwise, you know, we could just sell the business. And we need to think really big or nothing. And we raised a $100,000,000 on the back of that from DST. And it's really kind of invested about 80% of that capital into building new product, which is payments, merchant acquiring and corporate card and spend management. And we also took a very different approach as in we build that merchant acquiring infrastructure, become a principal acquirer everywhere we operate. And we become a principal issuer of everywhere we operate, so that we do not have any third party in the dependency that we can deliver a multicurrency product from the ground up that which no one have the capability to provide in the underlying processor or infrastructure at all, that across APAC and Europe and North America as well.
00:14:17 · Jack Zhang
So I think that is also a very big decision because we know these new products are not going to get generating any revenue for the next three years. Imagine, right, in 2019, we had 12,000,000 revenue and you deploy 80% of the money you raise to building two new products that basically are not going to give you any revenue for the next two years. And at the same time, you are starving your core product because we've been keep recruiting and most of the new people recruited goes to new product, that the core kind of money movement infrastructure that kind of almost like expanding slower. We even kind of try very hard to keep up with the customer demand as we're growing. But we know that the world from a first principle perspective, that makes sense to have a single platform to handle all the customers' money, especially for mid market and SMBs, right? So you don't want it to If you need like one market that you have one provider for processing your payment, another provider for your banking, and maybe another provider for corporate card, fine. But if you think about it, if you operate in 20 countries, you're not going to have three providers in each of the country. And at that time, you know, there's really not much of an alternative for those companies to operate globally. We think it makes a lot of sense to have a single platform to do that. And then we decided to betting all our future that vision, which is driving kind of mostly first principle, but also kind of validated by customer demand. And now this new product generating about 60% of the company's revenue. And the product only went live in sort of 2022. And within sort of four years of sort of expanding that essentially 90% of our customers' acquisition still own the kind of the global business account. But then we upsell the payments product, we upsell the corporate card and spend management product. Now more than half of our customers are using two or more product. About 80% of our revenue are generated from people using two or more product. So the customer that using more product of Airwallet is a lot more profitable than the customer that only using one product. It's a lot more sticky as well.
00:16:28 · Jack Zhang
And now sort of with AI democratizing the vertical discipline in sort of office of the CFO, gives us even more advantages to tackling, we call it the entire financial operating system of the corporate finance team, right? You know, the financial operating system for a startup or for a global company. And kind of thinking about like, you know, coming, tell us sort of the reason we kind of bet on that multi product vision. But if you're thinking about AI, you know, you have to go multiparta from day one almost because the nature of AI is disrupting this vertical discipline that because the agent can all work in together to create an outcome, you don't really need everything staying in their own line anymore. There used to be like twenty, thirty winners in the office of CFO that you have, you know, expense management, procurement, accounting and revenue recognition at P and A, so that you have like twenty, thirty winners, all multi billion dollar companies sharing this a few $100,000,000,000 sort of market cap or revenue pool. But now the addressable market become not only that, but also plus the 10,000,000,000,000 plus sort of finance knowledge worker. And the vendor is not going to be twenty, thirty company anymore. It's going to be two, three company, all kind of doing everything, which is the nature of how AI operates, that the addressable market is also kind of 10x, right? So it's less inclusive, right? So you have less winners, so more competitive. The market size is also 10x more. So the price to win has also become a lot bigger. So that all these things we built in Airwallex in the last decade, taking the pulse of Max Resistant become the best decision for us to able to win in the world of AI finance. Because now we have controlled infrastructure for banking, money in on the payments and money out on corporate card and also transfer and spend management. We also kind of have the workflow of this company that we've seen in a very good position, not only to just deal with the infrastructure side, but also kind of give them the agent to help them to managing the finance team autonomously that ultimately become this agenic finance layer or financial operating system sitting on top of the infrastructure we built over the last decade to creating even bigger component value in the next decade.
00:18:47 · Chris Corbishley
[00:18:47] S0: Yeah. And I'd love to touch a bit in more detail on the on AI finance layer that, you know, one of the things we've observed is actually this, we haven't seen this kind of AI native fintech wave emerge in the last three years. If anything, actually, is the, the big players, large consolidators that have managed to innovate and, and consolidate fast enough to, to create agentic payments to to actually dominate the market. And one of the things we've been seeing, we've been observing obviously in in public markets, now private markets is this huge concentration in the hands of a few. This it's almost like a steepening of the power law amongst a few players that can dominate. And and I I again remember over the last five to ten years of investing in fintechs, we we were all trying to hit one of these different wedges. You know, the corporate cards player in Europe, you know, we do the pay hawk, a penny lane, know, maybe a lending business. And we just quickly saw, particularly Airwallex actually just start to cover the whole stack, and it was purely that bet on that first principles thinking, as well as answering customer demand that got you there, which is a bold bet, but it certainly paid off.
00:19:51 · Jack Zhang
[00:19:51] S1: Yeah. I mean, like, a lot of them, you know, from a VC point of view, doesn't make a lot of sense. People always try to buck you in one category. Are you a spend management or corporate card provider? Are you a global NIO bank? Or are you payments provider? Because that's kind of what people observe and seeing. And, you know, we essentially are bold enough to say, Hey, you know, we don't think that we should be categorized in any of these verticals. We think by first and first, there should be a single platform and financial operating system for these global companies and somebody should be there. And then just like how Citibank or JPMorgan been servicing these Fortune 500 companies and there needs to be a new generation where global bank do the same for global company. And the definition of a global company have fundamentally changed from the like of Nestle Coca Cola twenty, thirty years ago to now, any AI startup is a global first company. Any company even selling on Shopify is a global company all the way to Airbnb, Google is a global company. I think technology democratizing the definition of going global from day one and the financial infrastructure need to be, you know, doing the same. And that is the mission of Airwallex is building that future of the global banking and by first principle, creating that sort of the single platform to empower these entrepreneurs and business builders to access global markets from day one, rely on the Airwallex to do everything essentially in finance. And do you