Why We Led the Series B Round of Tradystream
We are excited to announce Pivot’s lead investment in the Series B round of Traydstream, a London-based FinTech company at the nexus of digitizing and automating the trade finance industry.
The Opportunity
In 2022, global trade volumes exceeded $32T, 80% — 90% of which relies on trade finance (defined as the financing of international trade flow) and most of which is supported by a letter of credit (LC), a pledge made by a bank on behalf of an importer or exporter. LCs can cause undue friction because any time a seller ships goods to a buyer, that transaction is captured on paper and then checked by the buyer, seller, and their respective banks before it can be endorsed and approved for payment.
Banks incur the risk of goods not being delivered to the buyer and ensure that the seller gets paid if the goods are delivered. However, there is a risk that the goods will be lost, stolen, or damaged during shipping. If any of these risks occur, the bank would lose money, so it collects a series of documents through the shipping process to manage its risk. Depending on the client and industry, banks can take up to 15 days, and in some cases, longer to authorize payment, especially if discrepancies are found. This keying and re-keying of information is costly, time-consuming, and beset by inefficiencies. It not only delays operations and creates significant tie-up in working capital that could be used more effectively.
The Solution
Traydstream powers the next generation of document processing and verification by marrying the latest advances in cloud computing with artificial intelligence, and natural language processing. Its interconnected platform digitizes a substantial part of the trade finance process and is compatible with LCs, collections, and open account-based trade. Core proprietary functionality includes:
· Optical Character Recognition (OCR) Engine — Converts paper-based information to digital data to automate the capture and processing of trade finance documents. It ensures all attributes — structured and unstructured — are extracted appropriately and has a >97% document classification accuracy rate.
· Compliance Aggregator — Runs compliance checks against 350K Uniform Customs & Practice and International Standard Banking Practice trade rules, highlighting any discrepancies.
· Rules Engine — Automates the checking of trade finance documents against international sanction screens, real-time container tracking, and vessel ownership information through REST APIs with leading logistics, compliance, AML, and ratification services (e.g., Refinitiv, Lloyd’s List Intelligence, LexisNexis).
The above modules are part and parcel of the company’s primary product, TraydCheck, a SaaS platform that is hosted on Microsoft Azure and can be accessed through a browser-based UI or integration with an external API. The solution can be implemented on a standalone basis or integrated with banking backend systems, compliance providers, or trade operations. Since inception, the company has has processed >2M documents, $20B+ in transaction volume, while also exhibiting negligible churn and >80% pilot-to-mandate conversion rate.
Attractiveness of the Model
Trade finance is fraught with repetitive, cumbersome, and error-prone manual processes that involve significant human intervention and oversight. Further compounding the problem is a shrinking pool of subject-matter experts that banks can rely upon to conduct document checking, sanction screening, AML detection, and compliance checks. Traydstream solves for the inefficiencies and operational risk inherent in trade finance processing through a technology platform that combines machine learning with natural language processing to digitize structured and unstructured elements, automate trade rules, and run near-instant verification of compliance mandates with full auditability and a high degree of accuracy. As more institutions focus on sharpening their bottom line, trade finance processing is ripe to be outsourced to a best-of-breed provider like Traydstream. We are pleased to welcome Tradystream to the Pivot portfolio and look forward to working together to scale the platform.
