Airwallex, a global fintech giant with investments from Tencent and Li-Kashing, Hong Kong's wealthiest individual, has acquired Mexican payments business MexPago, the value of which has not been revealed. The deal will enable Airwallex to spread its reach into the Americas, an area that is proving attractive to fintech organizations due to its massive youth population.
Global fintech giant Airwallex has announced that it has agreed to acquire MexPago, a payments company based in Mexico, for an undisclosed sum to fuel the firm's expansion into Latin America. MexPago, which faces stiff competition from the likes of PayPal, Stripe, and Block, provides cross-border payment solutions to mainly small and medium-sized enterprises. Airwallex makes money through collecting a fee for each transaction made. This acquisition is, however, still subject to regulatory approvals and customary closing conditions.
Leading the push into Latin America is CEO Jack Zhang, who believes Mexico could serve as a refuge when considering the geopolitical and economic uncertainty between the U.S. and China. Zhang specified that this was due to Mexico's close proximity to the U.S., cheaper labour, and more attractive opportunities for e-commerce. He added, “U.S. people export to Mexico to sell to the consumer there and, because of the supply chain, you can also export out of Mexico to other countries like the United States. You get both the inflow and outflow of money. That's really what we like the most. We can take a global company to Mexico and also help the global companies making payments to the supply chain.”
Latin America has gained a level of appeal to fintech companies due to its young population and increasing online presence, a fact which has only been accentuated by the U.S.-China trade war. China has attempted to address these issues by attempting to reduce the U.S. trade deficit, although this has been to little success. Zhang concluded that Mexico holds many opportunities for Airwallex, providing a much needed hedge in the face of rising trade tensions.
Airwallex, a company based in Australia, has global operations in the United States, Canada, China, the United Kingdom, Australia, and Singapore. It is the second most valuable unicorn in the country, following the design and presentations software startup, Canva, which has been valued at $40 billion.
Airwallex, which customers include Papaya Global, Zip, Shein and Navan, has processed more than $50 billion over the course of a year. It has also partnered with major players like American Express, Shopify and Brex, aiming to expand its services globally. Although it has been a difficult climate for fintech companies since interest rates have increased significantly, Airwallex is still supported by investors such as Salesforce Ventures, Sequoia, Tencent and Lone Pine Capital by having raised over $900 million in venture capital. This has brought Airwallex’s valuation to approximately $5.6 billion.
Zhang declared that the company has achieved sufficient maturity to contemplate an initial public offering, a milestone supported by the fact that the business now processes more than $50 billion in annualized transactions. Despite this, Airwallex will not go through with an IPO until specific annual revenues have been attained, which right now Zhang is aiming for $100 million of annual recurring revenue (ARR) for the software business within the next year or two. He further commented that, once the target is reached, a public listing will be considered."At this point we are still engaged in our mission, which is to empower smaller businesses to function across the world while continuing to create software that will aid in preserving our margins and bettering our costs," Zhang said.In terms of services offered, MexPago is much the same as Airwallex - multi-currency accounts for small- and medium-sized businesses, foreign exchange services, and payment processing. There are, however, a few more payment methods available than those provided by Airwallex.
Zhang stated that the company has progressed to a stage where it is now considering an initial public offering, given that its transactions have reached $50 billion in annualized transactions. Nevertheless, Zhang stressed that they will not proceed with the IPO until they are able to reach the revenue goal of $100 million of annual recurring revenue for the software business within the next year or two. Zhang further stated, "At this point we are still moving forward with our mission, which is to ensure smaller businesses can work worldwide while manufacturing software to protect our margins and enhance our costs."In comparison to Airwallex, MexPago provides the same services such as multi-currency accounts for small- and medium-sized businesses, foreign exchange services, and payment processing. Additionally, MexPago offers more payment methods than Airwallex.
A major benefit of the MexPago arrangement, Zhang reported, is the capability to gain a regulatory authorization in Mexico without engaging in a lengthy procedure of applying to the central bank. The business was granted an Institution of Electronic Payment Funds (IFPE) license from MexPago.Airwallex's move to gain access to SPEI and OXXO will make it easier for its customers to make payments, either in Mexico or beyond. This will enable the company to tap into the growing population of digital-savvy consumers in Latin America, while allowing it to leverage its global payment infrastructure.
Airwallex has recently gained access to SPEI and OXXO, two payment methods popular in Mexico, that will open up its services to customers both domestically and around the world. This move could prove to be beneficial to the company given that Mexico is home to a digitally-advanced population that tends to be distrustful towards traditional banking. 460% year-over-year growth in the Americas has been reported by Airwallex, while other firms have also been expanding their presence in Latin America, such as SumUp which opened an office in Brazil back in 2013. Airwallex's access to SPEI and OXXO would provide their customers with the convenience to make payments, whether in Mexico or overseas. Gaining access to native infrastructure would give Airwallex a competitive advantage in terms of their global proposition, according to the company's Co-Founder and CEO, Jack Zhang.
Comments