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 fuel an ambitious global expansion plan.

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

Speaking to Fintech News Singapore during the Singapore Fintech Festival 2024, Bill Deng, founder and CEO of XTransfer, shared the company’s future plans and growth strategy, including expanding its global presence and obtaining licenses in other jurisdictions.

“In Singapore, we having received approval in principle for a Major Payment Institution (MPI) license, and we will have the full license soon. In the Netherlands we hope to obtain a license by Christmas and in Dubai, which serves as a gateway to the Gulf Cooperation Council (GCC) countries, we have just submitted our application.

» said Deng.

“The next step will be major markets such as Brazil and Mexico, where we will submit license applications. »

A focus on Southeast Asia

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

The company offers a comprehensive global payments platform designed to reduce global trade spend and fill gaps in financial services available to SMEs. Its key offerings include multi-currency accounts, secure and compliant payments and global transfers.

During its first six years of operation, XTransfer focused on the mainland China market, helping SMEs meet their foreign trade collection needs.

In 2023, the company took its first step towards global expansion by entering the Hong Kong market. Since then, it has been done important milestonesparticularly in South-East Asia.

Deng highlighted the strategic importance of Singapore, a global trade hub, to XTransfer. Once fully authorized there, the company plans to roll out a comprehensive portfolio services offering for SMEs in the country.

These services will aim to improve international business transactions and solve common problems faced by SMEs, such as high transaction costs, long payment times and difficulties opening traditional bank accounts, he said .

Increase in trade between China and ASEAN

XTransfer’s focus on Southeast Asia aligns with the region’s vibrant economic activity and strong trade ties with China.

Trade between China and the Association of Southeast Asian Nations (ASEAN) more than tripled since 2010, increasing from US$235.5 billion to US$696.7 billion in 2023. In 2023, China’s foreign direct investment (FDI) to ASEAN amounted to US$17.3 billion making China ASEAN’s largest trading partner and third largest source of FDI.

This upward trend continued in 2024. reported that from January to September 2024, the collection volume of the company’s mainland China SME customers from the Association of Southeast Asian Nations (ASEAN) countries increased by almost 100% year-on-year. year, reflecting the surge in commercial activity between the two regions.

An underserved B2B payments market

Deng explained how his extensive experience in payment systems and money movement at organizations such as Alipay and Visa motivated him to tap into the underserved B2B sector.

“Everyone was talking about what would be the next big thing, with most of the innovations focused on consumer-related services, like merchant payments,” Deng said.

“But in B2B payments, the size of that market is much larger, ten times larger than business-to-consumer (B2C) payments.”

Despite this opportunity, the B2B payments market remains largely underserved and traditional banks are often unwilling to meet the needs of SMEs due to low profit margins, high risks and high operational costs.

“This creates a huge problem: many SMEs cannot find banks willing to open accounts for them,” Deng said. “Without a bank account, they have no way of receiving payments from international customers. »

XTransfer was founded to fill these gaps. The company has built an extensive international network, with partnerships involving leading banks such as JPMorgan, Deutsche Bank, DBS and Barclays, to provide global account services in over 200 countries and local account services in 35 countries. different.

These partnerships allow XTransfer’s SME customers to receive money in local currencies from local bank transfers, significantly reducing costs and delays associated with international wire transfers, Deng said.

Since its inception, XTransfer has become a leading cross-border payments provider, establishing a presence in over 14 countries and regions and serving a growing network of over 550,000 business customers.

Overcoming Challenges

However, operating in the B2B payments market comes with a unique set of challenges. Unlike consumer payments where robust infrastructure like Visa and Mastercard complements traditional banking services, B2B payments often rely on bank transfer systems that are outdated, slow, complex and riddled with risks.

Additionally, customer acquisition is more difficult in B2B. Small businesses value reliability and stability over cost, and building trust with them takes a lot of time and effort.

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

“Risk management in B2B payments is very different from B2C payments. In the B2C field, there are well-established industry standards, but in the B2B field, there are no universal standards,” Deng 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 invested heavily in technology, particularly artificial intelligence (AI).

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

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

We then carry out manual checks, reviewing all transactions and gathering supporting documentation from our clients. We then integrate these learnings into our AI systems, so that these machines can then automatically review these transactions. Today, 90% of our transactions are reviewed automatically. »

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