XTransfer, a Chinese fintech startup that offers cross-border financial services to SMEs, is poised to quintuple the number of its clients in the next two years, after seeing exponential revenue growth against the headwinds of the coronavirus outbreak and geopolitical uncertainties.
Chinese exporters have weathered through “an extremely difficult time” in 2020, said Bill Deng Guobiao, co-founder and CEO of XTransfer, in an interview with DealStreetAsia.
“People were worried about China’s production being impacted when the pandemic first hit Wuhan, forcing many cities into lockdowns; While starting from April, when the COVID widely spread globally, concerns emerged around reduced overseas demand for Chinese products,” said Deng. “But statistics shows that Chinese exports are resilient, thanks to the presence of SMEs.”
According to customs statistics, the value of China’s imports & exports of goods totaled 23.1 trillion yuan ($3.5 trillion) in the first three quarters, up 0.7 per cent from that of 2019.
Although the total value of goods trade had contracted by 6.5 per cent and 0.2 per cent in Q1 and Q2, respectively, the number bounced back to 8.9 trillion yuan ($1.3 billion) in Q3, up 7.5 per cent year-on-year (YoY). Exports in particular, reached 5 trillion yuan ($752.6 billion) with a YoY growth of 10.2 per cent.
The uplifting macro-environment has strengthened XTransfer’s confidence in setting itself an ambitious expansion plan. The startup, which now serves some 100,000 small and medium-sized enterprises (SMEs) in China, targets to scale up its client base to approximately 500,000 in the following one to two years.
XTransfer, founded in May 2017, partners with multinational banks and financial institutions to develop a global network that enables small and medium-sized importers and exporters to process simplified, lower-cost trade transactions through its multi-currency cash management, cross-border financial risk management, and one-stop foreign trade collection solutions.
Apart from its headquarters in Shanghai, the firm has also set up branches in Hong Kong, Shenzhen, Britain, the US, Canada, Japan, Australia, and Singapore.
The firm already saw its revenue in the first three quarters of 2020 grow eight times from the number recorded in the same period in 2019. After reaching profitability this April, it expects to maintain a month-over-month (MoM) revenue growth of 15-20 per cent in the following months.
Besides an export market boom in recent years, the “exponential growth” seen in XTransfer’s business, said Deng, is also attributable to China’s “increasingly fragmented, miniaturized market dynamics.”
“Cross-border financial services are much-needed by micro, small and medium-sized exporters… We will have a larger base of potential clients to tout [our solutions and products] when there are more players around,” he said. “An accelerated growth could happen when we reach a certain scale, because the recognition of existing clients will help us explore more potential customers.”
Global inroad
XTransfer just completed a Series C1 round of financing led by Australia’s venture capital firm Telstra Ventures, with participation from Hong Kong-based pan-Asia investment firm MindWorks Ventures and its existing shareholders. Financial details of the new round were not disclosed.
The new transaction helped XTransfer rope in investors outside of mainland China for the first time, as the startup paves its way for a potential inroad into the global market to serve overseas clients.
“We are essentially a global enterprise,” said Deng. “XTransfer was born in China, where we plan to focus our firepower on in the first five years [since inception]. We will explore the global market in the future to serve not only domestic clients but also SMEs worldwide.”
The new proceeds will be primarily used to further expand XTransfer’s cooperation with global financial institutions, and to finance the development of its data-driven, AI-powered risk management infrastructure for anti-money laundering. The firm also plans to step up promotion of products in China.
In its previous funding rounds, the startup raised $15 million in a Series B round led by eWTP Capital, an investment firm that counts e-commerce giant Alibaba and its Ant Group as major limited partners (LPs), in October 2019.
China Merchants Venture, an investment arm of state-owned China Merchants Group; China-based 01VC; Yunqi Partners, which mainly invests in businesses targeting corporate clients; and China’s Gaorong Capital – who had backed the firm’s $10-million Series A round in October 2018 – re-upped in the Series B1 round.
