Online spend down but confidence is rebounding: Airwallex

This unicorn payments start-up says consumers are snapping shut their wallets for online fashion to instead splurge on travel and education.

Airwallex co-founders, from left. Xijing Dai, Jack Zhang, Lucy Liui and Max Li.

Australians spent less online than they did a year ago with consumers buying fewer clothes and products through e-commerce, and instead shifting their spend towards travel and education, according to new statistics from unicorn start-up Airwallex. However, an interest rate pause is expected to see consumer spending rebound.

The first Digital Economy Index, released on Monday by payments fintech Airwallex, paints a mixed picture for the nation’s e-commerce businesses, with Victorian online businesses taking a 25 per cent hit to turnover, while South Australian businesses were down by 13.6 per cent and Western Australia by 36 per cent.

Online businesses in New South Wales boomed however, with turnover jumping 13 per cent year-on-year, while those in Queensland are up by 6 per cent and Tasmania by 2 per cent.

Airwallex’s director of strategy Amelia Hamer told The Australian that NSW businesses were benefiting from an increase in local e-commerce spend, while those in Queensland and Tasmania gained from a boost in online tourism spending.

Victorian online businesses slumped from a lag in attracting the education dollar, she said, but there are indications its online economy will grow in 2023 with a 5 per cent increase reported in Q1 2023 compared to Q4 2022.

Ms Hamer said the digital economy is now seeing green shoots of growth in the last couple of months after softer conditions at the beginning of the year.

Airwallex director of strategy Amelia Hamer.

“What we’re hearing from customers is that consumer confidence is starting to rebound. What is difficult for businesses is that the costs of inventory and stock and labour have been rising with inflation, so they are looking for ways to keep prices low for consumers who are feeling the hip pocket pinch.

“As businesses look for ways to cut costs to stay competitive, products like what we offer at Airwallex have a strong appeal.”

Last week’s NAB survey showed that business conditions overall remain well above long-run average, with confidence advancing three points to minus-1.

“The survey suggests the economy is still holding up and indicates there has been some easing in inflation,” NAB chief economist Alan Oster said last week.

Airwallex’s index was built on data from a sample of 1000 of its customers, adjusted for company size, industry and geographic location. The company processes nearly $50bn in annualised transactions each year.

Overall, Australians’ online spending dropped by around $124m nationwide year-on-year.

With tech layoffs crippling the sector, Ms Hamer said Airwallex is following through on its stated plan of hiring for another 90 new roles in Australia this year to keep up with customer demand.

Now one of Australia’s highest valued private technology companies, Airwallex was co-founded in Melbourne by Jack Zhang and three of his university friends in 2015. It was the fastest Australian start-up to ever reach a $1bn valuation.

The fintech’s platform allows other businesses to operate internationally, by enabling quick cross-border transactions.

Airwallex was most recently valued at $US5.5bn ($7.91bn) in a November funding round 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.

“Even while we know businesses and consumers are operating in a difficult economic environment, Airwallex is still on a strong growth path,” Ms Hamer said.