Luke Latham, Airwallex Australia and New Zealand managing director
Cross-border payments specialist Airwallex hopes to win more of its clients’ business, with the launch of a multi-currency cash management account.
Airwallex has partnered with JP Morgan Asset Management, which will manage the fund, called Yield. It is promising “returns more than double that of the big banks”, without lock-up periods.
It is also claiming to offer the first CMA in Australia that provides returns on both Australian dollar and US dollar balances. The rates on offer currently are 3.39 per cent for AUD balances and 4.07 per cent for USD balances.
The minimum deposit is A$500,000 but Luke Latham, managing director of Airwallex Australia and New Zealand, said the plan was to take smaller deposits at some point in the future.
Latham said: “The conversations we’ve had with customers show they want greater flexibility and returns for their funds.
“The current system leaves many businesses at a disadvantage, from the companies that raise money in USDS and have no option in Australia to earn returns on those funds without converting them to USD. Other businesses report struggling with unexpected cash flow needs while funds are locked in a term deposit account.”
Airwallex commissioned Edgar Dunn & Co to survey SMEs on their attitudes to tech companies, software platforms and e-commerce businesses offering embedded finance options. The response was very positive.
Eighty-two per cent of respondents said they felt overlooked by their banks and would consider a like-for-like alternative from a service provider.
A significant number of respondents said lengthy processing and settlement times for cross-border payments were a problem for their business, and forced currency conversion imposed high fees.
This is not the first time research has highlighted the promise of embedded finance. When financial technology company FIS asked bank and other financial services executives at the end of last year what their priorities were for investment in business innovation in 2023, embedded finance topped the list.
And McKinsey estimated that embedded finance generated global revenue of US$20 billion in 2021, an amount that could double over the next three to five years.
But there have been setbacks. Earlier this year, accounting and business management software company Xero sold its lending subsidiary Waddle - just three years after acquiring it.
And Tyro Payments, which operates a banking business that offers loans to its merchant customers, put the banking operation under review earlier in the year.
For Tyro, banking plays a small part in its overall business, contributing $8.5 million of gross profit to group gross profit of $204.3 million in the year to June.
At a time when the business outlook is uncertain and funding costs are high, a lending business that makes such a small contribution to total earnings could be more of a distraction than a source of new business.
Waddle presented a similar problem for Xero. The business, which has been sold to Commonwealth Bank, is a cloud-based lending platform offering invoice financing.
Xero got out of the business as part of a streamlining program, that saw the company’s headcount reduced by more than 700 staff. At the end of the day, a lending business was nice to have, but not essential.
Latham is confident Yield will be attractive to many of Airwallex’s 100,000 clients (around 10,000 in Australia) because it fills a gap in the market and addresses a couple of serious pain points that businesses have identified with their current cash handling arrangements.