SHANGHAI -- The wings of China's Ant Group, crowned as the world's most valuable financial technology startup, have been dramatically clipped in recent weeks with the cancellation of its planned initial public offering and binding new restrictions on its dealings with banks and customers.
But a young fintech launched by a group of Ant veterans is now attracting new international investors and expanding its tie-ups with banks.
The company, XTransfer, turned profitable last April and is seeing 900% annual revenue growth, according to Chief Executive Bill Deng, who was in charge of cross-border remittances at Ant until leaving to go on his own in 2017.
"We are like a PayPal for cross-border trade," he said.
XTransfer helps small and mid-sized Chinese importers and exporters with currency management, collections and other aspects of international transactions. With some 600 employees, the company has signed up more than 100,000 clients and is moving to expand its services in Japan with a tie-up to start in March with Mitsubishi UFJ Financial Group helping to process payments.
Shanghai-based XTransfer works globally with Standard Chartered Bank, Citibank, DBS and Barclays while also relying on local partners in the U.S. and U.K.
While big companies typically work directly with banks for their international transactions, SMEs have a harder time accessing cross-border services given their limited resources, lower individual demand and bank concerns about potential money laundering risks.
"Small traders who are now selling to a global customer base will need to join cross-border payment platforms like XTransfer," said Thomas Zhang, head of research at financial data service Uzabase in Shanghai. XTransfer holds local payment licenses in Hong Kong, Australia, Canada, the U.K. and U.S. and it is looking to further expand its offerings in South Korea and Southeast Asia.
"We want to expand in this area by piecing together all the scattered information of about fund flow and logistics in order to offer a one-stop system," said Deng, who estimates that 60% of Chinese exports come from SMEs. "[But] ultimately, we want to serve global customers, not only Chinese exporters."
Deng founded XTransfer with five former colleagues from Ant and its Alipay payments unit.
"We are grateful to Alibaba and Ant for our achievements," said Deng at a recent media briefing. "The issues faced by XTransfer today were problems that we troubleshot at Alipay."
Chinese venture capital firm Yunqi Partners became XTransfer's first backer in 2018 based on founding partner Mao Chengyu's familiarity with Deng and his team from Ant.
"XTransfer serves SMEs by using technology to enhance cross-border financial services that encompass risk control and compliance capability," Mao told Nikkei Asia. "I believe XTransfer will continue to provide greater value for the cross-border trade industry."
The venture arm of Australian telecommunications operator Telstra led XTransfer's latest funding round in October though the size has not been disclosed. Earlier rounds, which brought in more than $30 million, involved eWTP Capital, a fund backed by Ant and Alibaba Group Holding as well as the venture arm of state conglomerate China Merchants Group and technology investment funds such as MindWorks Ventures and Gaorong Capital.