Latest / Business Strategy Talks with Fexingo: Competitive Advantage, Market Positioning, and Growth Planning / How Airwallex Built a Moat on Cross-Border Payments Infrastructure
Transcript
- Lucas: So today I want to talk about a company that most people have never heard of, even though it processes billions of dollars in cross-border payments every year. It's called Airwallex, and it's one of the most interesting infrastructure moats I've seen in fintech. Luna: Airwallex — I've heard the name but honestly don't know much about it. Where are they based? Lucas: Founded in Melbourne, Australia, in 2015. The origin story is pretty classic: the founders — Jack Zhang, Lucy Liu, and a few others — were running a coffee shop and a trading business, and they kept getting hammered by bank fees on international transfers. They realised the existing system was built on a patchwork of correspondent banks that added layers of cost and delay. Luna: So they built their own payment rails. Lucas: Exactly. They started by creating a multi-currency account that let businesses hold, send, and receive money in multiple currencies without needing a separate bank account in each country. But the real moat didn't come from the product — it came from the infrastructure they had to build underneath. Lucas: To move money across borders efficiently, Airwallex had to get licenses in every jurisdiction it operated in. As of mid-2026, they hold over 60 licenses globally, including a payments license in China, an EMI license in the UK, and money transmitter licenses in most US states. That regulatory moat is enormous. Luna: So the moat is partly regulatory — but also technological, right? They built their own proprietary payment network rather than piggybacking on SWIFT or using a third-party aggregator. Lucas: Right. They call it their 'global payment infrastructure.' Instead of routing transactions through correspondent banks, they maintain their own local bank accounts in each country and net off transactions internally wherever possible. That reduces cost and settlement time from days to seconds. Lucas: The more transactions flow through their network, the more opportunities they have to net internally — and the cheaper each additional transaction becomes. That's a classic network effect, and it's what makes the moat self-reinforcing. Luna: It sounds similar to what Wise does on the consumer side. But Airwallex is B2B, right? Lucas: Yeah, and that's an important distinction. Wise focuses on individual remittances and small business transfers. Airwallex targets mid-market and enterprise businesses — companies like Brex, Rippling, and Shopify that embed Airwallex's API into their own platforms so their customers can make cross-border payments without ever knowing Airwallex exists. Luna: So they're a sort of 'white label' payment infrastructure provider. Lucas: Exactly. And that's where the moat gets deeper. Once a platform like Shopify integrates Airwallex's API — which can take months of engineering work — the switching cost is high. They're not going to rip it out for a slightly cheaper alternative unless the savings are massive. Lucas: Airwallex also offers a virtual card product and treasury management, but the core moat is the payment rail itself. As of early 2026, they process over $50 billion in annualised transaction volume, and they've raised about $900 million in funding at a valuation north of $5.5 billion. Luna: That's a lot of capital. But is the business actually profitable yet? That's often the Achilles' heel for fintech infrastructure plays. Lucas: They haven't disclosed profitability publicly, but their CFO has said they're 'on a path to cash flow positive.' The revenue model is mainly transaction fees — typically a small percentage of each transfer, plus a markup on the exchange rate. Margins are thin, but as volume scales, the fixed cost of holding licenses and maintaining the network gets spread over more revenue. Luna: Before we go further — and I don't want to break the flow — but this whole conversation about building infrastructure that outlasts competitors is exactly the kind of thinking that makes this show valuable. If you're a founder or strategist and these deep dives have helped you think about your own moat, listener support is what keeps us ad-free and independent. You can find the show at buy me a coffee dot com slash fexingo. No pressure, just a nod if it's been useful. Lucas: Appreciate that, Luna. And back to Airwallex — one risk I want to highlight is that their core moat could be eroded if a giant like Stripe or Adyen decides to compete more aggressively in cross-border SME payments. Stripe already offers Stripe Connect for platforms, and Adyen has a global acquiring network. Airwallex's advantage right now is focus and speed — they're smaller and can move faster. Lucas: Another risk is regulatory. Holding 60+ licenses means they have to comply with 60+ sets of rules. A change in anti-money laundering requirements in the EU, or a crackdown on capital outflows in China, could disrupt their model. Luna: So the moat is real but not unassailable. What's the one thing you'd point to as the most durable part of their advantage? Lucas: I'd say the network effect from local bank accounts. It's not just the licenses — it's the relationships they've built with local banks in each country to open those accounts. That takes years of trust-building. A competitor can't just apply for a license and get 60 local bank accounts overnight. Lucas: Airwallex also invested early in proprietary technology for foreign exchange risk management and compliance screening. They built their own anti-money laundering engine rather than licensing one from a third party. That gives them more control and lower cost per transaction as they scale. Luna: So the moat is a combination of regulatory density, technological investment, and network effects. It's a good framework for evaluating any fintech infrastructure play. Lucas: Exactly. If you're looking at a payments company, ask: do they own their own rails? Do they hold local licenses? Do they power other platforms? If the answer is yes to all three, you're probably looking at a durable moat. Lucas: Airwallex isn't a household name, but it's becoming the plumbing behind thousands of businesses that move money across borders. And as global e-commerce grows — especially in Asia-Pacific — that plumbing becomes more valuable. Luna: I can see why you found this case interesting. It's a reminder that moats don't always come from brand or patent — sometimes they're built quietly, one license at a time. Lucas: Right. And next episode, we'll look at a company that built a moat on data — but not the way you'd expect. See you then.