The startup helping Tencent capture a share of Southeast Asia’s remittances market

EMQ CEO Max Liu / Photo credit: EMQ

US$21 billion. That’s the expected transaction value of Asia’s digital remittances this year. The amount is also forecast to grow at an annual rate of 19%, which is faster than the global average.

The industry’s scale is why Chinese tech behemoth Tencent is keen to get in the game.

In 2017, the firm launched a remittance service in Hong Kong called We Remit, allowing overseas workers from the Philippines and Indonesia to send money home via their mobile phones.

Powering this service is Hong Kong-based fintech startup EMQ, which Tencent partnered with in 2017. The company is a financial settlements network that connects banks in different countries to make cross-border payments simpler.

“We want to take the friction out of money transfers,” says EMQ CEO Max Liu, adding “there’s a lot of costs and intermediaries embedded in [a single] transaction.”

Founded in 2014, EMQ is backed by international venture capital firms including 500 Startups, which invested in the company last year. But Liu is keeping tight-lipped about the other details of the investment, citing non-disclosure agreements.

Making cross-border payments easier

Liu compares EMQ to pipes that connect different countries. Through its partnerships with local banks and smaller financial services providers like e-wallets and cash pick-up locations, it streamlines cross-border payments.

For example, EMQ is the network that enables a We Remit user in Hong Kong to send funds from their mobile phone to a cash pick up location in the Philippines.

Here’s how the process works: First, the We Remit user initiates the transaction on the app. Through an application programming interface, Tencent instructs EMQ on the details of the transfer, and EMQ sends the money to the recipient’s bank account, e-wallet, or preferred cash pick-up point from its account in the archipelago. Tencent will then settle payment with EMQ.

Because EMQ integrates directly with end points like banks, it eliminates unnecessary intermediaries, which makes it much quicker than the usual cross-border process where each transaction has to go through numerous approvals from different stakeholders.

There are two components that contribute to the startup’s revenue. The first is a fixed fee per transaction. So, if a client uses the EMQ network for 100,000 transactions, that client is charged 100,000 times a fixed dollar amount. The startup also earns from foreign exchange margins.

For now, EMQ caters to customer-facing businesses like Tencent that want to enable their users to send money overseas. The startup’s CEO also says it’s looking to enable the service for small and medium-sized enterprises later this year.

The startup now has tie-ups with 18 different banks in 11 countries. These include Hong Kong’s Shanghai Commercial Bank, Vietnam’s HDBank, and India’s Kotak Mahindra Bank. It also employs 100 staff members across its seven offices in Beijing, Hong Kong, Taiwan, Singapore, Malaysia, Indonesia, and Dubai.

Overcoming industry challenges