Why did we invest in Skydo?
1) A Large Shackled Market
As the world becomes more connected and supply chain global, seamless cross-border transactions have a critical role to play. A typical export hub supplies to over 100 countries — all with different regulations, banking infrastructure, and currencies. This makes scalability extremely difficult for a small-medium exporter unless they choose to shed a little bit of their margin to facilitate payments and compliance. With the growing significance of India as an export hub, Indian exporters not only need to remain cost-competitive with their counterparts but also require new-age solutions to boost their global competitiveness.
Global cross-border payments is a $41 trillion gargantuan market, and India, which contributes about $800 Billion to the industry, is steadily seeking to expand its footprint. The exports have witnessed a stellar 37% increase from FY 2020–21, and the country is trying to achieve the target of $1 trillion by 2030. However, the Indian export market is laden with several operational inefficiencies that not only deter new entrants from coming to the market but also limit the growth potential of existing ones. To achieve its true potential, the Indian export market will have to revolutionize its operations.
The biggest inefficiency is the 5% transaction fee on forex that an average exporter is expected to pay. In an industry that necessitates wafer-thin margins from a common vendor, these fees are downright oppressive. Moreover, the settlement process usually takes an excruciating 3–4 days to be finally completed.
Srivatsan and Movin, with their considerable expertise in the industry, were able to understand the problems plaguing cross-border transactions in the country. To further expand upon their understanding, they undertook an expedition across the country meeting over 500+ exporters to narrow down the exact pain points of the target customers. Few key problems that make it difficult to operate an export business in India:
1) Price Inefficiency: Exporters lose, on average, 3% of the transaction value between fees and forex conversion rates. At times, this loss was even witnessed to be about 5%. The wafer-thin margins in the business make this almost unaffordable.
2) Process Inefficiency: Wire-transfers, due to their manual nature, are inherently error-prone. Further, turn-around-time (TAT) is very uneven. All these predicaments are compounded by the absolute lack of transparency in the industry.
3) Documentation Hassles: Invoice-payment reconciliation from banks is excruciatingly slow, and there are usually significant challenges (in particular documentation) in availing export incentives, tax refunds, and duty drawbacks.
Thus, when Srivatsan and Movin scrutinised the functioning of the industry at a deeper level, they discovered the barrage of factors hindering the market’s growth. In response to these revelations, they started nurturing the ambition to rid the market of these issues and improve the state of the Indian cross-border payments frontier.
This ambition to become the drivers of the Indian export market’s growth led to the birth of Skydo.
2) Industry Ripe for Disruption
The cross-border payments market is slated for massive growth in the future with Asia right at the forefront. In particular, the India-US border is supposed to witness an epoch of exponential expansion which would position India firmly as a major trade hub globally. Over the past few years, India’s made considerable progress in easing cross-border trade. As per a 2021 UN survey, India’s rank moved up from 78.49% in 2019 to 90.32% in 2021
However, despite these glowing forecasts, the method of functioning for the industry is still archaic.
SWIFT, the predominant international payments system, is about half a century old. During this period, there have been no convincing alternatives proffered which could innovate the incumbent system and make cross-border payments less cumbersome for vendors.
Despite the general framework of the industry still being metaphorically ancient, there are some indications that the industry is at the precipice of a major upheaval.
The Rapid digitization of the other components of the B2B and the regulators seeming more susceptible to change as seen by the introduction of remittance licences, cross-border payments sandboxes, and the approval of OPGSP, hint toward a more progressive cross-border regulatory environment.
Moreover, challenger banks are aggressively aiming for the SMEs and the Forex business.
The industry is slowly embarking on a process of change and Skydo aims to be a pioneer through its unique proposition.
3) Fintech Founders with Deep Executive Experience
Srivatsan and Movin emerge as prospective reformers of the status quo due to the considerable experience and acumen they’ve been able to amass in the industry over their careers.
Srivastan attained great expertise in this space when he served as the Business Director at Rupeek. During this period, he was able to inject rapid growth into the company while keeping the ground operational costs low. Srivatsan is also an import-export entrepreneur having overseen this aspect of his family business. Thus, being acquainted with all the intricacies of the industry, he is keen on reforming the Indian cross-border payments market to optimize India’s performance.
Movin has led Product at several fintech, consumer, and B2B unicorns over the past decade. He has also led the Payments and UPI platform at PhonePe, a key operator in the space. He channels this remarkable repository of experience to help Skydo attain a pre-eminent stature in the industry, and make a positive difference for other vendors in this space.
To actualize their vision of revolutionizing the sector, they traveled across the country to comprehend the grievances of an average operator in the space. This consumer-centric approach helps distinguish them from others in the market.
4) Meticulously Calibrated Approach
Skydo’s vision is to create a global payments system and trade platform which helps its users circumvent the current issues in the market. To achieve this, Skydo aims to initially create an India-US corridor that would solve basic trade compliance workflows for Indian exporters. Eventually, they aim to launch other major global corridors to resolve billing and reconciliation problems worldwide.
SMEs represent about 50% of the Indian cross-border payments market, yet most large operators in this space only pay attention to the e-commerce platforms and large multinationals. To truly eradicate the suffering of the SMEs in the industry, Skydo seeks to optimize the payment side of the cross-border payments market. This is a direct by-product of the feedback Srivatsan and Movin were able to solicit before entering the market which helped them refine their perspectives.
Conclusion
Cross-border payments is a huge burgeoning market. A significant proportion of this growth would trickle down to India as well. However, the current deficiencies in the industry threaten to jeopardize the Indian market’s future. The existing regulatory issues and other operational deficiencies are rampant in the industry and threaten the smaller players more gravely.
However, through a combination of factors, the industry has gradually gotten to a position where it seems ripe for a major revolution. Skydo aims to capitalise on this opportunity, and finally create a platform that caters specifically to SMEs. This is a unique proposition that solves a major problem in the market.
The biggest benign factor for Skydo is the expertise that Srivatsan and Movin bring to the table. Together, they form one of the most exciting founding teams in the country.
Finally, cross-border payments is one of the biggest and most complex sectors in the world. The zeal that Skydo emanates in taking on the current market deficiencies, and helping the common vendors accelerate their growth is truly remarkable.
We are extremely proud to be a part of their journey and their vision to posit India at the zenith of the global cross-border trade frontier.
