‘It’s just apathy’: Airwallex takes on big banks with new high interest product

The Australian fintech has identified a gap in the market, creating a product that allows customers to earn higher interest on US balances without opening an overseas account.

Airwallex Australia and New Zealand managing director Luke Latham says the company has partnered with JP Morgan to offer the new Yield product.

Airwallex has upped the ante in its battle against the big banks, launching a new “Yield” product that allows businesses to earn interest on US dollar balances without needing to open an overseas bank account.

The Australian fintech – which was founded in 2015 and is now one of the country’s highest-valued private companies – is aiming to help businesses scale globally by enabling quick cross-border transactions, taking advantage of what it labels “apathy” from the top four banks.

One of the biggest friction points for any business – particularly start-ups – is the inability to earn a return on funds held in other currencies, unless they open a separate bank account overseas, which is a complex process.

Airwallex Australia and New Zealand managing director Luke Latham said customers could also have immediate access to their money, unlike term deposits, with the company partnering with JPMorgan.

“One of the things we’re most proud of is these are your actual funds. We are actively investing them into a money market fund with a reputable partner JPMorgan, but you have immediate access to them whenever you need to. No break fees. No other asterisk attached to that,” Mr Latham said.

Airwallex global head of product Shannon Scott said start-ups, which raise cash from investors in US dollars, or businesses that have overseas customers who pay invoices in their local currency, often were disadvantaged unless they had foreign bank accounts.

“We see a lot of start-ups and VC-backed companies that are receiving funds in USD. So if you run a series A (funding round) and you’re fortunate to get $1m – maybe it’s coming from a US investor that’s in USD, it’s just sitting there,” Mr Scott said.

“There aren’t a lot of offerings where you can actually take advantage of those interest products on a foreign currency. And so our product is genuinely unique relative to what the Australian banks are providing. Why aren’t they doing it themselves? I think it’s just apathy.

“There’s a lack of a sense of a need to actually keep expanding their services.”

Airwallex was co-founded in Melbourne by Jack Zhang and three of his university friends. It was the fastest Australian start-up to ever reach a $1bn valuation and in 2021 joined Canva to become one of Australia’s richest tech start-ups.

Airwallex was valued at $US5.6bn ($8.71bn) in a funding round in November last year, when it sought $US100m in financing, taking its total raised to $US900m from investors Square Peg, Salesforce Ventures, Sequoia Capital China, Lone Pine Capital, Hermitage Capital, 1835i Ventures and Tencent, as well as Hostplus and a North American pension fund.

Airwallex co-founder and CEO Jack Zhang.

Mr Zhang, a former ANZ and NAB forex solutions designer, has aimed to build a payments network, in the same way Facebook became a giant social network.

“From payments, treasury and spend management and now returns through Yield, Airwallex will keep expanding into new areas because incumbent banks are letting businesses down,” Mr Zhang said.

“Whether it’s our recently released Bill Pay product that helps businesses automate the tedious process of paying domestic and international invoices, or now Yield, Airwallex is continuously listening to what businesses need and building products so they can manage their finances more efficiently.”

Mr Scott envisages the company creating a portfolio of products similar to an app store to make cross-border transactions smoother.

“It‘s actually about supporting your business process. Often the money movement is just a means to what your primary business is,” he said.

“But there’s a lot of opportunity to bring that together with your actual financial needs. So we’ve sort of moved towards building a lot of software applications that sit on top of that infrastructure. In the long term, this will become like an app store, or business workflow products, that are very tightly integrated with those global rails.”

James Meharg, chief financial officer of Jet Charge – Australia’s biggest EV charging infrastructure company – said he “jumped at the change to use Yield”.

“It meant Airwallex accounts earn us interest on our foreign currencies, which complements our broader FX strategy and increases our options when managing FX,” Mr Meharg said.

“It has been great having a responsive and competitive partner outside of the traditional players that might have taken their customers for granted.”

Airwallex is currently offering Yield to a minimum initial investment threshold before a planned broader rollout in 2024 to other markets and customers and with additional currencies.

Return rates are currently 3.39 per cent for Australian dollar balances and 4.07 per cent for USD balances, compared to an average of 1.38 per cent for business saver accounts with the big banks for AUD and 1.50 per cent for USD.