walletsclub wants to be the ‘visa for e-wallets’ across the world

The Rise of Digital Payments and the Need for Interoperability

Globally, digital payment systems are experiencing widespread adoption. As reported by GSMA, an association representing mobile network operators, by the close of 2020, over 300 mobile money providers were operating, serving more than 100,000 active users.

These providers, frequently referred to as e-wallets, facilitate money transfers and payment processing via mobile phones, bypassing the necessity of traditional banking institutions. Their effectiveness is contingent upon broad acceptance and a robust network effect.

The Challenge of Fragmentation

Despite significant user bases – exemplified by Ant Group’s Alipay with over one billion annual users – many services face limitations in international usability due to restricted global penetration.

A key issue is the lack of interoperability between most wallets, contrasting with the seamless connectivity found within traditional banking systems, as highlighted by Xue Zhixiang, a veteran of Alibaba’s cloud infrastructure and Alipay.

WalletsClub: A Solution for Global Digital Wallet Connectivity

Founded in Hong Kong in 2019, WalletsClub aims to bridge this gap, positioning itself as the “Visa for digital wallets.” The company’s objective is to enable seamless money transfers between the numerous electronic money services worldwide.

“We function as a clearinghouse for digital wallets,” explains Xue, the company’s Chief Executive Officer.

How a Clearing System Works

A clearing system acts as an intermediary in financial transactions, ensuring both efficiency and security. It verifies fund availability and records the transfer between parties involved. WalletsClub, Xue asserts, allows for real-time payment sending and receiving.

The company’s technology is built upon the “ISO 20022” standard, a globally recognized data exchange language for financial institutions.

Targeting Wallets, Not Individual Users

WalletsClub focuses on connecting the multitude of e-wallets globally, rather than directly targeting individual consumers. The vision is to allow payments from any mobile wallet, anywhere, provided both the sender’s and receiver’s service providers are WalletsClub members.

This mirrors the functionality of Visa and Mastercard, which process transactions from credit cards issued by diverse banks within their networks. The company intends to generate revenue by applying a fixed fee to each transaction.

Empowering Regional Players

By introducing interoperability, WalletsClub can empower even smaller, regionally focused e-wallets, expanding their reach wherever the clearing system is operational.

Addressing the Needs of the Unbanked

WalletsClub seeks to provide a pathway for individuals without bank accounts to easily transfer funds through digital wallets, which are more accessible than traditional banking services. A significant demand is anticipated from overseas migrant workers sending remittances to their home countries, such as the substantial population of Southeast Asian workers abroad.

Competition and Market Landscape

WalletsClub’s venture potentially overlaps with existing remittance services like Western Union and MoneyGram, which maintain extensive “agent” networks. While Alipay initiated money transfers between Hong Kong and the Philippines in 2018, Xue notes that Ant Group’s primary focus remains on payments, not remittances.

According to World Bank data, remittances from diaspora workers constituted the largest source of external financing for low- and middle-income countries (excluding China) in 2019, exceeding $500 billion and surpassing foreign direct investment.

Furthermore, the startup could also impact cross-border payment aggregators, which simplify payment integration for merchants.

Building Trust and Achieving Profitability

A primary challenge for WalletsClub is establishing trust with potential clients. Currently, the company is engaged in discussions with electronic money services established by Chinese entrepreneurs in Hong Kong, Singapore, and Canada.

These founders, leveraging experience from China’s fintech boom, have created a significant number of Chinese-made wallets, particularly in emerging markets. Many faced difficulties competing with industry giants like Tencent and Ant, compounded by increasing regulatory scrutiny in China.

“Achieving 20 members and processing several hundred transactions between each member pair daily would render us profitable,” Xue stated, adding that the goal is to secure a dozen customers by the end of the year.