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You are at:Home»Fintech»Once close enough for a takeover, Stripe and Airwallex are now going after each other
Fintech

Once close enough for a takeover, Stripe and Airwallex are now going after each other

techtost.comBy techtost.com18 April 202608 Mins Read
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Once Close Enough For A Takeover, Stripe And Airwallex Are
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Jack Zhang was 34 years old, three and a half years into running a startup, and sitting across from one of the most powerful investors in Silicon Valley. Sequoia’s Michael Moritz had invited him to his house—a place with, Zhang recalls, two stories and a direct view of the Golden Gate Bridge—to make the case for the sale.

Stripe wanted to buy Airwallex for $1.2 billion. At the time, the Melbourne company had about $2 million in annual revenue. The math was almost overwhelming: an income multiplied by about 600 times. Patrick Collison, Moritz argued, was a founder of the generation. The arrangement would “complex” into something extraordinary. Zhang listened. He walked around San Francisco for two weeks, restless, unable to think straight. At some point she said yes.

He then flew nearly 8,000 miles back home.

“I really got deep into what motivates me to build Airwallex,” he said earlier this week, speaking to this overseas editor. “I was three and a half years in the business. The business was growing 100x in 2018. And I just tasted what it had [was like] be an entrepreneur. And that was what I dreamed of.”

Two of its three co-founders had voted against the deal, which helped. But he says the clearest signal came from looking at the board back in his office. The vision was still there, unfinished: to build the financial infrastructure that allows any business anywhere in the world to operate as if it were a local company.

This decision seems increasingly prophetic. Airwallex now claims more than $1.3 billion in annual revenue and is growing 85% year over year. It processes an annual transaction volume approaching $300 billion. None of this came easy — and Zhang argues that’s exactly the point.

It is a belief that runs much deeper than business strategy. Zhang grew up in Qingdao, a port city in northeast China, and moved to Melbourne at 15 without his parents, who barely spoke English, living with a host family. When his family’s finances collapsed, he took on four jobs to get a computer science degree at the University of Melbourne, according to the Australian Financial Review: bartending, washing dishes, graveyard shifts at a gas station, picking lemons on a farm during school holidays, which he called the hardest job he ever had. He went on to spend years writing trading code in the front office of an Australian investment bank, a job that paid well and never felt “deeply fulfilled”.

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Before Airwallex, he started about 10 businesses: a magazine at age 14, a property development company, import-export of wine and olive oil from Australia to Asia, textiles going the other way, a hamburger chain.

He was running a coffee shop in Melbourne when the idea for Airwallex was formed. While trying to pay coffee bean suppliers in Brazil, Indonesia and Guatemala, co-founder Max Lee watched payments disappear into correspondent banking systems — flagged and frozen by U.S. intermediary banks that enforce OFAC’s sanctions rules, sometimes coming back weeks after they were sent. “That prompted me to really look at how correspondent banking works,” Zhang said, “how SWIFT works and how we could build our own global money movement network.”

That’s still the idea, it’s just grown significantly. Airwallex now holds nearly 90 financial licenses in 50 markets. Zhang estimates that Stripe has about half that number at best. Obtaining these licenses was extremely time-consuming – in Japan alone, the process took seven years. In some emerging markets, the company had to acquire shell companies whose licenses were no longer issued by central banks, and then completely rebuild the technology underneath them.

“You can’t really vibe code a merger with Mexico’s central bank,” Zhang said. “We need to have a secure room – you have to do a biometric scan just to get in to access the central bank integration.”

The issue of holding these licenses is not regulatory window dressing. In Japan, for example, Stripe and Square can process payments, but they must transfer funds to the merchant’s bank account immediately. Airwallex, with its funds transfer operator license, can hold these funds in its ecosystem. This means a customer can issue bank accounts, issue cards and spend money without ever leaving the platform.

The foreign exchange economy alone is significant: a US merchant settling transactions in Australian dollars avoids the 2% to 3% conversion fee typically charged by processors like Stripe to return funds in US dollars — and can use those local balances to pay local suppliers, run payroll and cover digital marketing expenses, all at interbank rates.

“You no longer operate like an American company,” Zhang said. “You operate like a company with entities around the world, but without having to physically create those entities.”

The slow build was intentional, and Zhang has a framework for it that he returns to often: the “path of maximum resistance.” Every license, every bank consolidation, every local payment rail that Airwallex has painstakingly put together has created a layer that makes it harder to compete. “It took us six and a half years to reach $100 million in annual recurring revenue,” Zhang said. “But after that, it took a little over three years to get to a billion.”

Competitive logic, he says, boils down to something basic about what it means to have infrastructure versus someone else’s riding. If you don’t control your end-to-end payment workflow and something goes wrong, you can’t access the underlying data to explain it to your customer. You cannot extend new products cleanly on top of someone else’s stack. “Building on top of other infrastructure,” he said, “is just not scalable.”

For most of its life, Airwallex and Stripe operated primarily in different geographies, selling to different buyers. This is changing. As Stripe pushes deeper into international markets and Airwallex makes its first serious moves into the United States, the overlap is growing.

The buyer for Airwallex has historically been the CFO’s office in Australia and Southeast Asia, where the company is already established — CFOs, treasury teams — which puts it on a different sales pitch than Stripe, whose customer acquisition is largely driven by US developers choosing a default starting point for a new company. Over 90% of Airwallex customers land on a business account product first, and payment and expense management follows from there. More than half use multiple products, Zhang says.

Still, there are challenges that Zhang doesn’t try to play down. The biggest one may be that Stripe is Silicon Valley’s golden child, as its private equity has created millionaires across the tech industry. Another is the accompanying branding gap. Airwallex needs to be embedded in the thinking of engineers and developers—not just finance teams—so that founders instinctively approach it. “Our brand is not there yet,” he said. “This is a more difficult competition to win.”

It’s a competition closely watched by a variety of pros. Sequoia was an early backer of Airwallex – although the deal came through Sequoia Capital China, which has since spun off and renamed itself Hongshan – and remains one of the company’s largest shareholders. Investment firm Greenoaks Capital owns stakes in both companies. Zhang shrugged off any hint of awkwardness around these overlapping tables. Investors, he noted, are betting on a big market.

However, it raises the question of valuation. Stripe was valued at $159 billion in an auction in February — up 74 percent from a year earlier — after processing $1.9 trillion in total payment volume by 2025. Airwallex, commissioned 8 billion dollars valuation in December, is valued at about one-twentieth of that. But according to Zhang, Stripe’s payment volume is only six times that of Airwallex, not 20 times. With annual growth of 85% and a forecast of $2 billion in revenue within the next year, Airwallex is closing the revenue gap faster than the valuation gap suggests.

Whether the market eventually notices is a different question — one that an IPO, which Zhang says is at least three to five years away, could open up.

Meanwhile, Zhang says he has focused on longer-term goals: one million customers by 2030, annual revenue of $20 billion, average revenue per customer rising from about $12,000 to $13,000 today to about $20,000. A suite of autonomous financial products powered by artificial intelligence—agents that don’t just display data but actually execute trades—is now rolling out. The thesis is that a decade of financial data across the entire corporate finance stack, from revenue collection to treasury management to vendor payments and expenses, has created a learning set that no competitor can replicate overnight, he suggests.

Now to see if all that hard work is enough to eat into Stripe’s market share. For now, the competition seems to be playing out at a distance. Zhang and Collison were never friends, but they were friendly while merger talks were underway years ago. Last year, Zhang and Collison were both at Greenoaks Capital’s annual gathering. They didn’t speak.

Airwallex close film Greenoaks Capital HongShan Jack Zhang Michael Moritz sequoia capital Stripe takeover
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Fintech

Once close enough for a takeover, Stripe and Airwallex are now going after each other

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