Why this Chinese unicorn is betting big on B2B cross-border payments in Southeast Asia

Cross-border payments company XTransfer is leveraging its success in China to drive ambitious global expansion plans.

The company aims to support the international growth of small and medium-sized enterprises (SMEs) with fast and convenient payment solutions, with a focus on emerging markets in Southeast Asia, the Middle East, and Latin America.

XTransfer founder and CEO Bill Deng appeared on FinTech News Singapore during the Singapore FinTech Festival 2024 and discussed the company’s future, including expanding its global footprint and acquiring licenses in additional jurisdictions. We shared our plans and growth strategies.

“In Singapore, we received The Major Payment Institution (MPI) license has been approved in principle and we expect to receive the full license soon. It is expected to receive a license in the Netherlands by Christmas this year, and has just submitted an application in Dubai, which is the gateway to the Gulf Cooperation Council (GCC). ”

Deng Xiaoping said.

“The next tier will be major markets such as Brazil and Mexico, where we plan to submit license applications.”

Mainly in Southeast Asia

Founded in 2017 and headquartered in Shanghai, XTransfer is a specialist in business-to-business (B2B) cross-border payments.

The company offers a full-featured global payments platform designed to reduce global trade costs and address gaps in financial services available to small and medium-sized businesses. Its key services include multi-currency accounts, secure and compliant payments, and global money transfers.

For the first six years of its establishment, XTransfer focused on the mainland China market, helping small and medium-sized enterprises with their foreign trade collection needs.

The company entered the Hong Kong market in 2023, taking the first step toward global expansion. has since been achieved important milestonesespecially in Southeast Asia.

Deng Xiaoping emphasized the strategic importance of Singapore as a global trading hub for XTransfer. Once fully licensed there, the company plans to roll out comprehensive wallet services for small and medium-sized businesses in the country.

These services aim to improve international commerce and address common pain points faced by small and medium-sized businesses, such as high transaction costs, long remittance times, and the difficulty of opening traditional bank accounts, he said. said.

Rapid increase in trade between China and ASEAN

XTransfer’s focus on Southeast Asia is consistent with the region’s dynamic economic activity and strong trade relationship with China.

Trade between China and the Association of Southeast Asian Nations (ASEAN) It has tripled again Since 2010, it has jumped from US$235.5 billion to US$696.7 billion in 2023. In 2023, foreign direct investment (FDI) from China to ASEAN reached USD 17.3 billion, making China the largest trading partner of ASEAN and the third largest source of FDI.

This upward trend continued in 2024. reported From January to September 2024, the company’s mainland China SME customers’ collections from Association of Southeast Asian Nations (ASEAN) countries increased by almost 100% year-on-year, reflecting a surge in trade activity between the two regions. It is said that he did.

The underserved B2B payments market

Deng explained that his extensive experience in payment systems and funds transfer at organizations such as Alipay and Visa motivated him to enter the underserved B2B industry.

“Everyone was talking about the next big thing, and most innovations were focused on consumer-related services such as merchant payments,” Deng said.

“However, the market size for B2B payments is much larger, 10 times larger than business-to-consumer (B2C).”

Despite this opportunity, the B2B payments market remains underserved, with traditional banks reluctant to serve small and medium-sized enterprises due to low margins, high risks, and high operating costs. There are many things.

“This is creating a big problem. Many small and medium-sized enterprises cannot find a bank to open an account with them,” Deng said. “Without a bank account, there is no way to receive payments from overseas customers.”

XTransfer was founded to address these gaps. The company has built an extensive international network in partnership with major banks such as JPMorgan, Deutsche Bank, DBS, and Barclays, providing global account services in over 200 countries and local account services in 35 countries. I am.

These partnerships will allow XTransfer’s small and medium-sized business customers to receive remittances in their local currency through local bank transfers, significantly reducing the costs and delays associated with international wire transfers, Deng said.

Since its inception, XTransfer has grown into a leading cross-border payments provider, establishing a presence in more than 14 countries and territories and serving a growing network of more than 550,000 business customers.

overcome challenges

However, operating a business in the B2B payments market comes with a unique set of challenges. Unlike consumer payments, where robust infrastructure such as Visa and Mastercard is layered on top of traditional banking services, B2B payments often rely on outdated bank transfer systems that are slow, complex, and risk-filled. depends on.

Additionally, customer acquisition is more difficult in B2B. Small businesses prioritize reliability and stability over cost, and establishing trusting relationships with them requires a lot of time and effort.

Risk management is also a challenge. Trade data is often unstructured and inconsistent, forcing market participants to build their own systems to manage risk. Tightening anti-money laundering (AML) regulations add further complexity.

“Risk management in B2B payments is very different from B2C payments. There are well-established industry standards in B2C, but there are no universal standards in the B2B field,” Deng Xiaoping said. “Regulators only require ‘due diligence,’ but the definition of what constitutes adequate due diligence can vary.”

To address these challenges, XTransfer has expanded its risk management team to approximately 150 people and is making significant investments in technology, particularly artificial intelligence (AI).

“Our approach is simple: digitize as many processes as possible and leverage AI to optimize these processes,” said Deng Xiaoping.

“We start by collecting all the data we need and then convert all this unstructured data into a structured way.

We then perform manual checks to confirm all transactions and collect supporting documents from customers. We then feed these learnings into our AI systems, allowing these machines to automatically review these transactions. Currently, 90% of our transactions are automatically reviewed. ”

Featured image credit: Edited from freepic