Airwallex: The founder explains the incredible story behind his fintech unicorn

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0:41We look forward to seeing you there. When I was 30 years old, my daughter was born and I look at her, I was like, I've not done anything that make her proud. And that's the trigger point is I actually decided to resign again and then start Airwallux. That's Jack Zhang, the founder and CEO of B2B fintech company Airwallox. And he certainly did make his daughter proud. His company was founded in 2015 in Melbourne, Australia. Within a decade, it had gone global with 26 offices around the world, valued by investors at more than$6 billion. It scaled east to west, capturing market share, and it scaled fast.

1:23What we found is finding people with certain personality traits is far more important than the experience. People have intellectual curiosity, people are able to think deep, people have hustle and grit. Those personality traits tend to work out a lot better. Welcome to the Business Leader podcast. I'm Dougal Shaw, and my guest today is Jack Zhang, CEO of Airwallex. Airwallex has created a tech-first financial operating system, helping businesses scale across borders faster by doing things like processing international payments. The fintech business was founded in Melbourne in 2015, but is now headquartered in Singapore.

2:05It has more than 2 ,000 employees and a major London office, leading its expansion in Europe, the Middle East and Asia, which is where I went to meet Zhang in person. His story of entrepreneurship is one of the most extraordinary that you will hear. He's built from scratch, a company valued this year at$6.2 billion by investors. Not bad for someone who was sent by his parents while still a child from China to Australia, speaking little English, but possessing an insatiable appetite for entrepreneurship.

2:42One interesting thing I read about you growing up is that you were fascinated by computer games, like a lot of kids, I suppose. But is that what got you into coding at an early age? not necessarily what got me into coding is actually using those smart calculators but this is like 20 years ago and when I was in year 11 during high school I need to use those kind of calculators for math and other subjects I need to put some formulas in a calculator what I found if I can actually code those formulas in then I can just type the number and it automatically give me the result. And you're allowed to do that in the sort of final exam into university.

3:23So I basically coded everything into my calculator. Basically, I finished the final exam within a half the time of normal people did. So did you know from that point that you wanted to be an entrepreneur who specialized in kind of tech and coding, or was that not an idea that formed yet? Not really. I didn't know what exactly I wanted to do at the time and I started my first I would say adventure while I was 14 so I started a magazine and called urban exploration essentially it's about introducing the city activities for students in a city think about the offline version of a Facebook and that went viral in my city and you know I think more than 8 ,000 merchants was on border to the platform to actually advertising that activities in point of interest for the student.

4:15I would say more than 50 % of the students in my city would read that magazine. So I think that early success, unintentionally, because it's just a student magazine and it's free and we don't need to pay anybody, but we had great revenues. I think we made more than$150 ,000 within a two year period and that sort of success really got him into I guess starting businesses or starting something with idea. The amazing thing I thought from my point of view was age 16 you moved to Australia by yourself without your family were you kind of shell-shocked doing that or were you quite mature for your age and you were ready to do that?

4:56I didn't really think that much I think I I was 15 or 16 at the time, and my parents thought the Western education could fit better for my personality because I'm very rebellious, and also I'm very curious about everything. And for some reason, my dad thought I would do better overseas, and I don't have any family in Australia either. So the only option is to stay with a homestay, which is Aussie family, that I basically become a legal guardian. I spent more than two years with them. And looking at your CV there, on paper, despite your extraordinary circumstances, it looked like you did the kind of things that a bright middle class student would do, that you applied for graduate schemes.

5:46You went on to work for, I think it was Aviva and various banks. But on top of that, you're also running all these companies on the side. You had your software algorithm, I think a wine and olive oil export business, a retail business. Why were you doing all these extra businesses? Was it a compulsion? Yeah, so I think I worked for about two years and I think I was in Hong Kong for a bit. Then I started my first, I would say, startup selling algorithmic trading software to allow mutual fund or hedge fund to do auto hedging of that international sort of multi-currency position automatically. and that didn't really go anywhere.

6:25And I thought, you know, maybe that's not, maybe I'm not just an entrepreneur. Maybe I can't build a tech business. So I went back to Australia and I started experimenting a lot of these ideas that are outside of tech. But, you know, I think fundamentally it's because I wanted to try to figure something out that I actually enjoy to do. And I'm doing all these things. The conclusion is I'm not enjoying doing any of that, even though that kind of each of the businesses this actually went fairly successful. That's why I always keep my full-time job writing code, as in I know I'm passionate about technology.

7:00I wanted to ultimately build something leveraging technology. And when I was 30 years old, my daughter was born, and I looked at her, I was like, I've not done anything that make her proud. And that's the trigger point, is I actually decided to resign again and then start Airwallux. Did you learn anything from those businesses, those kind of side hustle businesses that were valuable lessons for you? All these, I think I probably started a dozen of these businesses in real estate and in architecture, you know, importing, exporting and retail. All these businesses once succeeded, I think that really built out the confidence.

7:39And none of those businesses succeeded without challenges. And I think that really shaped the personality. I have a lot of grit in building businesses and also at the same time a lot of confidence that we will always be succeeding. And you even launched a coffee shop. You aspired for it to be a franchise. I mean that's a completely different world running a retail business like a coffee shop. What business lessons did you learn from that? So I was reading a magazine called Telstra Fast 50 Companies. sort of like an article that Telstra, which is the largest telecom in Australia, published every year to talk about the fast-growing companies in Australia.

8:14And I found more than 40 % of those businesses are retail businesses, essentially franchise businesses. And I thought that's a very good area, build a business. And at the same time, I also have a real estate development company and I'm kind of interested in getting into commercial real estate and doing like the coffee business will kind of involve commercial real estate. And I thought it's kind of an area of lending for me as well. At the same time, you know, Melbourne is very famous for coffee worldwide. And there's a growing population in Asia and in China that sort of adopting the coffee culture.

8:47And there's a massive, if you're looking back in the last decade, and it's more than 10 unicorns been built in that kind of specialty coffee franchise business. And we kind of really was early mover in that direction. what we found is you know in our business is very kind of operational heavy and people are not showing up one day and you have to deal with a lot of people in competency issues and I mean a lot of people love it and it's just not kind of my thing and I was an investor and I'm just hearing these stories I'm like okay I'm not interested in to resign from my day-to-day job just doing a very people heavy operational sort of entrepreneur job and but during that process we found out importing beans and packages from, you know, Brazil, from Indonesia, packages from China is a very expensive, we're paying like 4-5 % for exchange.

9:38And we found that's a far more interesting problem to solve. And that's how Airwallex was born.

9:48Airwallex provides a suite of digital products that makes it easier for businesses to manage their finances in our global economy. This might mean taking a payment from a supplier, or setting up an online payment link to send to an international customer so you can collect the money in your own currency. A real coding challenge when you consider all the different kind of legacy banking infrastructures that have to communicate around the world to make these transactions happen. So did you do the original coding? And if so, were you doing it from the coffee shop? Where were you based to begin with?

10:21We got a service office on sort of the center of Melbourne on Collin Street. And actually next to my old work building, we had like a six people office, three of my co-founders. Then later on, like Lucy joined as a fifth co-founder and also our first investor. So she put in a million dollars and that's kind of how we got the business started. And obviously you had to think of how this is going to scale. And I know you had several iterations before you got that right. The initial idea is that it's going to work on a kind of peer-to-peer basis. so you're kind of bypassing the need for any international transactions.

10:59What was the problem with that way of doing it? That we just need a huge amount of scale on both directions for something to work, right? So we initially thought we're going to start with Australia and China, but we're just not able to get enough traction or volume to do enough peer-to-peer. And plus, peer-to-peer netting is illegal in China. So we essentially have both regulatory blockers and technology blockers or scaling blockers and that's just never going to work. Lucky that we had some seed funding and we leveraged the seed funding that basically co-called all the investment banks and then ultimately Macquarie Bank in Australia decided to give us interbank connectivity so that we can have streaming price from the interbank that essentially at a cost of less than one basis point and we can pass that price to the retail customers.

11:49And I suppose at the software company, once you've kind of got it right, the great thing is you can potentially scale globally very quickly or is that oversimplifying it is there a lot of work to be done with regulation uh setting up physical offices what were the challenges of kind of growing it even beyond australia um i think the number challenges number one is regulatory challenges right so that uh we only like a less than 10 people team how do we get regulatory approval in both australia and multiple other jurisdictions So we started the business by getting our own licenses in both Hong Kong and Australia.

12:25But for UK, Europe, and other countries, we're leveraging other, we call aggregators, like CurrencyCloud in the UK, for example, is an early partner of us. Just over the years, we had a very clear vision that we're going to build our own infrastructure. We got to get our own licenses so that we can control the cost and the use experience ourselves without relying on third parties. So ultimately we outgrow them and then they become one of the 50 plus banking partners or vendors that we have around the world. And now we are regulated in more than 60 countries and markets around the world as well so that we just keep pursuing more and more licenses.

13:02Ultimately that native infrastructure gives us a leverage to creating the best cost structure and new experience for our customer. And to do that, obviously, you've got the amazing coding knowledge, but you need people skills, you need to be hiring and things like that. Did you have to get in other people who are good at that? Or did you find that your experience in running all those extra businesses actually gave you the soft skills to do that as well? I think doing all these small businesses myself that give me a lot of personality traits, I'm very kind of hands-on and doing everything. So when I'm actually hiring the first 100 people, I basically hire most of that myself.

13:41So I don't have a recruiter. I reached out every single one on LinkedIn. I basically pitched people face-to-face. I think that kind of founder mentality really helped that to attracting some of the best sellers. And then those people that were hired in Series A, they're still the most senior leaders in the company. So those people stay on with the company for the last seven, eight years. And then has been sort of scaling with the company as well. Zhang says the business nearly died several times. It wasn't a steady ascent to the top. Pivoting away from the peer-to-peer model was one dangerous moment.

14:16There were several other times where they thought they wouldn't have the investment in place to secure the funding rounds they needed to scale the business, with some institutions unsure whether to back them or not. They came close to bankruptcy and were saved on at least one occasion by a bridge round. Airwallex did raise millions in order to scale, and Zhang thinks this was vital. He had spotted the moment when fintech businesses had a unique window of opportunity. I think if you're looking at a fintech industry, it's actually a low-margin heart rate industry. For a lot of the traditional fintech, if you look at under the hood, a lot of the businesses started servicing heart rate industries.

14:57Where I think in that sort of 2012 to that sort of 2015-ish, that sort of time window when the cloud is kind of taking over the world, when mobile is taking over the world. I think as that kind of technology shift happens, that a lot of entrepreneurs like Monzo Revolut, Wise, and us saw a trend of this cloud migration of businesses and this sort of consumer migration to mobile. And that really gives the opportunity for a lot of these entrepreneurs in order to creating a better experience and then raising a lot of venture capital money to scale, right? So that, as I said, fintech is high risk. So you have to build a lot of technology to prevent fraud, to onboarding KYC, to, you know, fulfill regulatory requirement and getting licenses, you know, sometimes getting banking licenses, you know, sometimes getting not one license, but actually getting many licenses around the world.

15:53All this stuff is costing a lot of money to build. And if you can't scale your customer base, essentially you're not able to make any money, that essentially your business is going to die. So I think there's a very unique time window to build massive fintech businesses like Newbanker, Revolut, Brex in the US and Chime and etc. So I think as you can see, all these large businesses started in that sort of very unique time window. I think timing is very important and that funding environment is also very important. There were many twists and turns while raising money and scaling the business. Success was never certain, and Zhang was faced with an interesting dilemma in 2018, just three years into his journey.

16:40When you were offered in 2018, over a billion dollars from Stripe, that must have been very tempting to take, but you didn't. So what gave you that confidence to turn that down? I wouldn't say it's a confidence to turn it down. At that time, we were three years into the entrepreneur journey, and I was 33. And then in 2018, our business, the volume grew to 100x. So we just start getting the part of market fit, and we're kind of enjoying the scaling phase of the business. I just don't really know what's ahead of us. I can't really imagine if I do sell the company now, I'll be basically working for Stripe because it's a five-year lockup.

17:22then after the lockup, I'll be close to 40. Am I going to start another business like this? So ultimately, I just shared that I started many businesses, many small businesses, eventually tried to figure out what's interesting, what I'm passionate about, what makes me happy. And I finally found something. I actually really able to use my passion in both financial services and technology to do something to solve real world problems to kind of giving benefit to real businesses owners and entrepreneurs help them to build a business globally. And that's very meaningful vision and mission for us. And do I really want to give up that mission because of money?

18:04Do I have the opportunity to start again or something like this in my life ever again? That's really what makes me thinking like, I'm just not going to have the opportunity to do it again in my life, you know? So you could have carried on by working for someone else, but it's important that you're doing it and it's your vision that you're making happen, I suppose. Well, that's really what my passion is. I really enjoy it. I really wanted to build something. I really wanted to combine technology with the stuff I want to build. I really wanted to scale. I want to create impact. I want to have a clear mission of my life.

18:37And I think ultimately that's what makes me happy. And I think what ultimately makes me make that decision is what leads me to happiness. Zhang's ambitious vision for his company came to pass. To give you an idea of its scale, Airwallet has tens of thousands of customers in all regions of the world and just hit$1 billion in annualised revenue. It has handled in total more than$223 billion worth of transactions on the platform to date. If the cloud and mobile created an opportunity for fintech disruptors, the new big opportunity now is surely artificial intelligence, AI, How will that affect fintech companies?

19:20So I think AI is another sort of technology shift, right? So they're similar to, you know, the cloud, the mobile technology shift, but even bigger. And even at a larger scale, you know, in a couple of years, you think about it, everything will have AI in there. Even a toaster would have a chip that can interact with human and you can tell them what to do, right? It's interacting with a machine. and wherever these big technologies should happen, it's like millions of businesses are born or created or that a lot of these businesses are going to be benefited from this technology shift. Where in this AI technology shift, I see both, right?

19:56So a lot of the new businesses, like AI native businesses, they can use much less human from the get-go to build a massive scale. Like, you know, we have a lot of these examples like a lovable or cursor, a good example, with very small workforce but able to scale the business massively in a very quick period of time. But there's also big companies like Airwallex or Revolut or other fintechs or just all the big Facebook or the Meta or the Google's world that are also able to benefit from this because they have a lot of money to invest and they have also the technology platform to have all the data to ingest into the large language model to benefit from this technology shift.

20:35If you think about like software today, is very kind of user experience driven, right? You have to click a button to do one, to three, and then do something else after that. And all these things, you know, going to become autonomous machines in the future so that you can just have a much native interaction with machines and with, you know, I don't know what's called software or something else, right? So I think that a lot of these incumbents to the traditional bank are going to feel very hard to catch up because they still try to bridge in a gap between the cloud migration and, you know, they haven't even migrated all that stuff from the mainframe to the cloud yet, right?

21:15So the physical server to the cloud yet. They haven't even catch up the last sort of innovation or paradigm shift. And now this new paradigm shift, which is AI, that need a lot of data to drive innovation. And the data is not in the right place. It's all, you know, segmented and it's not like put properly and the pipeline is not ready. so you can't really consume the data the way that we can consume, that can fully leverage in the change of AI. And a lot of the CEOs of those traditional companies in common businesses are not technologists. So they still try to figure out what does it mean. Why are they taking like a decade to figure that out?

21:51I think this paradigm shift is going to override a lot of the distribution and momentum they had. Your business obviously started in Melbourne, now headquartered in Singapore, so you're kind of gradually moving westward. And we're in London today where you have offices, and I think you're staying here in London for a few weeks. What's your sense of the UK as a place to do business? Well, I actually bought a place in the UK recently, right? So I know a lot of people live in London. I'm actually one of the ones that figured out, you know, I wanted to move to London permanently. I think what, you know, London serving, you know, me the best or the airwires the best is the time zone, right?

22:29So within London, I can cover morning in Asia, because that's kind of at the end of the day. And I can use my afternoon to cover East Coast and West Coast in the U.S. And the only tricky part is Australia. But I think that the folks there interacting with you have to work late or get up really early. Yeah, so I think it really covers the 24-hour time zone really well. I was in New York for about a two-year period and out of New York. And that's really, really hard. I basically have to sleep at 3 a.m. every day. I mean, the time zone is great, but it's kind of, you know, I guess there's not much that politicians and humans can do to change that.

23:06We've kind of agreed on that. But in terms of the business environment, does it seem quite good, quite agile for someone like you? Well, the UK is one of our fastest growing regions, right? So we're doubling and tripling our business for the last three or four years. And we're expanding to many countries in Europe. So using London as our sort of EMEA headquarter really helped us to scale the business. Now we're launching in France. We're launching in Benelux. We're looking at Germany and Spain and Italy. So I think we're just using London as our kind of EMEA headquarter to really expand to other European countries.

23:40And I think that sort of the massive European market is still one of the largest economies in the world. I think London have this geographical benefit. And from a policy and talent point of view, that's like London is a very open economy and the talent here are very good. A lot of massive startups like Revolut and Wise have created these massive technology companies, have created a bunch of talent and they started companies and are creating more talent. I think it's a healthy ecosystem if you kind of compare it to Melbourne. We're the only big tech unicorn there and it's a lot tougher to be permanent and stay in there.

24:21You've been listening to me, Dougal Shaw, speaking to Jack Zhang, CEO of Airwallex, for the Business Leader podcast. Please do rate and subscribe to us wherever you get your podcasts. We do two episodes every week. And if you want to keep up to date with Business Leader, why not visit our website and subscribe to our weekly newsletter.

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