Neil Ni, XTransfer, on B2B cross-border payments

You're listening to Paytech Talk, recorded live at Money 2020 Amsterdam. My name is Jan-Jarp Oemflee from Cognito Amsterdam, and today I'm joined by Neil Nhi, Chief Strategy Officer of X-Transfer, the world's largest B2B cross-border trade payment platform, which is making its European debut right here at this event. Good morning, Neil. Good morning.

Good morning, great to have you with us. Can you start by introducing yourself and telling us a bit about Xtransfer? Sure, thank you for having me today. My name is Neil.

I'm the CSO of Xtransfer. I started with the banking background 10 years ago and joined Xtransfer 3 years ago. And Xtransfer by large is the largest cross-border B2B trade payment globally with a few different metrics from a TPV perspective. From the merchant base that we serve at the moment, we serve more than close to a million SMEs globally, as well as the team that we are building globally.

And very happy to dive into details later on and very glad to be here today. Great to have you. Question number one. X-Transfer has just announced partnerships with Societe Generale and BBVA right here at Money 2020.

What do these MRUs signal about your ambitions in Europe? Well, I would like to start, you know, look at the current geopolitical situation. Europe stands a very, very important market for us, right? If you look at the numbers at the China exporting, you know, static numbers, right?

So, U.S. are going down for 5-10%, but however, Europe has always been a very, very strong growth engine for the Chinese exporting. So that's the reason why it brings us to current MOU signed with both very important European banks.

And I think for those two names, they're not only helping us in penetrating into the European markets, as well if you look at the names, right? BBVA also have very, very strong presence in Latin America, which also are very, very important market for us. and the stock gen with the very, very strong legacy presence in Africa as well. And it also presents a huge opportunity for us when it comes to global expansion.

Thank you. You processed over 60 billion US dollars in total payment volume in 25 and served more than 800,000 SME clients worldwide. How does a platform built on China's export corridors translate into the European financial ecosystem? Yeah, as I mentioned, we started from China and for the first five years, we were very much focused on serving Chinese exporters.

And we grew into the largest platform in China. And then fast forward five years and for the past two, three years, what we have been building is really a global platform and also what we call the global expansion. And with that, we're starting with the closer trading partners with China, which are the emerging market. From our stance, we're looking at markets such as Latin America, ASEAN, Middle East, and Africa.

But however, as we all know, trade is all connected, right? So we also see very, very good volume from corridors such as Europe, Africa, Europe, Middle East, Europe, ASEAN, right? That where a platform like Xtransfer could be very very helpful for SMEs to helping not only the Chinese exporters but also the importer exporters in each of the respective countries in Europe Thank you XNet is the infrastructure backbone of your platform. Can you explain what it does and why it's a genuine differentiator and not just a buzzword?

Yeah, XNet is something that we have been building for the past nine years. Tell me. Yeah, it's a proprietary infrastructure settlement network for global B2B trade payments. What it does is really connect one bit all the SMEs globally, whereby SMEs from all stems have been underserved by the traditional banks for various reasons.

Two important factors that we can see is really, first of all, from ROI perspectives, that merchants are simply sometimes too small for the banks to serve them. And secondly, it's really also SMEs, their behavior can change quite constantly. It is difficult for banks. You need to capture them from a risk management perspective.

That's whereby we came in. First of all, we do everything manually. And at year four, year five, thanks to AI, it really hugely enhanced our capability, efficiency as well. Then comes to the XNet, where at the moment 98.

5% of the transaction are automatically reviewed by the AI, which is also XNet. That's on the sort of merchant side. On the other side is really the FI, the financial institutional side, right? So what we do is really trying to unify all the risk management standards, not only in all the major financial hubs like Hong Kong, where is our trading hub, as well as Singapore, Dubai.

But we are also trying to do that in all the emerging markets, such as Latin America, Africa. So when it comes to FI, it's really because each bank, they also have different risk uptie in terms of the sector they can support, what type of merchant they can support, where the country they are comfortable with. So XNET in a sort of nutshell is really trying to unify the settlement experience for both SME and the financial institutions on two sides. Yeah, you mentioned risk appetite.

Your risk and compliance architecture is clearly key to winning institutional partnerships. How do you make an AI-driven risk model credible enough for a bank like Deutsche or BNP Paribas? Yeah, they're two very big European banks indeed. Globally, we do bank with almost all the major banks, including some of the largest US banks as well.

So at the beginning, for sure, it was not easy because you have to prove yourself to the banks that you know what you're doing, especially when it comes to risk management service. So at the beginning, for the first 24 months, two-thirds of our staff are compliance people. And those guys have been working very, very hard, first of all, to check everything manually. So in the B2B, I just want to take a step back, right?

In the B2B, trade payment is really slightly different than the sort of B2C or B2B e-commerce. So in a B2C e-commerce scenario, I think the e-commerce platforms, such as Amazon, Shopify, they have done quite a lot for the payment companies. Because if you nail down the principle of cross-border payment, literally we have to making sure what we call the three flows, that they match against each other The first flow which is the information flow meaning who is trading with who what kind of merchandise they are trading how much merchant A should be paying to merchant B, right?

That's the information floor. The second floor is the logistic floor. We're trying to make sure, given some countries also have very strengthened AML sanction, where we want to make sure the shipping has never stopped by any country like Iran, North Korea, and Iraq. That's the kind of logistical flow.

Lastly, that's what we call the money flow. So if you put these three flows into a B2C or e-commerce platform, the first two flows, very important information, the logistical flows, have already been provided by guys like Amazon or Shopify. So as a payment company, I think that you're really occupying the last floor, which is the mounting floor, right? So the role that you are playing under that scenario is really you're playing a role of aggregator, right?

Aggregator, you sort of, you know, the platform gives you $100, you give 12 to merchant A, A to merchant B, and 20 to merchant C in that sequence. But however, if you put that three flows into what we do, the B2B trade payment, because we are 100% offline. That's also the reason why for each of the flows, we have to be supported by documents, like paper documents. If you backtrack 10 years ago when we just started our company, right?

So the information flow, in our circumstance, will be supported by performer invoices, in the contract, and logistic flow will be supported by logistic documents, and also custom filings, right? And for sure, as we all know, in the international trade situation, all the documents, all the filings, they come in different form of shapes, right? So then AI helped us really to build the kind of, you know, the infrastructure to making sure the banks are comfortable with the flows that we are supporting.

And also, we are only supporting the goods payment, which means we are very, very well supported by all the documents. And also at the back end, we have all the APIs linked to the bank's database in order for them to, wherever needed, they can also have access to the kind of, you know, back end merchant information. Thank you. So, X2X enables instant zero fee settlement between X-Transfer clients.

That sounds almost too good to be true in B2B cross-border payments. How does it work and what does it say about the power of your network? I think the X2X is really similar to when it comes to C2C payment. People are very familiar with PayPal.

In China and Asia, people are very familiar with Alipay. If we both have a PayPal account, that's also settled instantly. The mechanism is sort of similar in that context. However, I think you already mentioned, it is much more complex at the back end than we can imagine, because we need to go back to the principle of the three flows, right?

So which means before we can enable the X to X instant settlement at the back end, we already, number one, KYC, the both buyer and seller. Secondly, relying on our AI infrastructure, we already making sure that all the information are up to the standard that XNet has been implemented for the past as well That where we can in that situation we get where we can support the X to X payment settlement So your growth numbers to in emerging markets are striking Africa up 273% Latin America up 94 in 25 are these corridors underserved by traditional finance and is X transfer filling a gap the banks have left?

I think the answer to this question is yes and no, because that situation has already been there for the past not only 50 or 100 years. So we believe that the gap we are filling is really at the moment and also put that in another word is really we are competing not with the banks, we are complementary each other with the banks. However, the market share within those emerging markets we've been competing against is really the parallel market, what we call the underground money operator in a way.

So the downside of the underground money is underground money operator is really, for sure the pros for their service is very fast, very, the pricing is also very competitive. The only downside is that they are not compliant. The reason why it is called the gray market is really because they mix the white money with the good money and the black money. And we tend into, you know, people have no other choice and turn to the kind of, you know, parallel market.

But what we do, and there's volume that we think it's taking, you know, to serve those SMEs, they come to a more compliant platform, compliant service. And in that sense, our number one value proposition for the past, you know, nine years have never been faster, cheaper, but for sure we are very fast, cheap in that sense. But number one value proposition from our standpoint, standard view is really compliant and accessibility. to the SMEs.

Right. So that's kind of, you know, where we come to play to help merchants in these two, you know, corridors for them to sell them goods more rapidly versus, you know, using traditional banking and, you know, unregulated money operator, operator kind of, you know, channels. Final question. Europe is famously fragmented, 30 plus regulatory environments, very different banking cultures.

What does a smart European expansion actually look like for X-Transfer? Yes, I think that really goes back to the global settlement network we are building at the moment, where we do believe trades are connected globally. Once we connect those in the emerging market, i.e.

the global south market, the trade itself will help us to penetrate into the three different European markets. Because at the end of the day, trade has been here for the past 100,000 years. So I think as long as we are providing a compliant and fast and rapid settlement for global trade, those markets will come naturally in the next three to five years. Thank you very much.

Neil, thank you for being here. You've been listening to Neil Nhi, Chief Strategy Officer at X-Transfer, recorded live at Money 2020 Amsterdam. That's Paytech Talk, the podcast where payment professionals come to stay ahead. Subscribe on Spotify, Apple Podcasts or Transistor FM.

Connect with us on LinkedIn and we'll see you in the next episode. Thank you. Thank you, JJ, for having me.