In an exclusive conversation with Fintech Watch, Mr. Roshan Shah, Co-Founder & CEO of VoloFin, delved into the inception story and the driving force behind this innovative venture. Founded in 2020 by Roshan Shah and Anand Tiwari, VoloFin emerged from a deep-seated need to address the substantial trade finance gap in India, particularly affecting SMEs. Leveraging their extensive experience in the BFSI sector, notably within the insurance domain, the founders identified the potential of fintech and digitization in bridging this gap.
Edited excerpts from the interview
Share the inception story of VoloFin and the idea behind this venture.
The founding members started their careers in the BFSI sector and primarily in the Insurance sector, where they worked for one of the world’s largest Insurance brokers, Marsh. While working with Marsh the founders mainly dealt with reputed insurers in the domestic and international markets and structured insurance-backed programs for Indian corporates and/or International Banks / FIs. Most of the programs were backed by support from MNC Banks as they were ready to take exposures on the obligors based on the quality of the underlying receivables and payables and the recourse profile of the obligors which was different than the standard approach of the domestic traditional banks, which focussed on the MPBF calculations and working capital limits were assigned on the back of collaterals and guarantees offered by their clients.
Having worked in this space for almost a decade in markets like; India, the Middle East, and Singapore, the founders started making their plans for starting a fintech factoring platform that would resolve the working capital gap in cross-border trade. Since the founders had a strong experience in the Indian market, wherein there were phenomenal opportunities, and were strategically placed in Singapore where the Insurance and Banking sector had good capacities, it was decided to start the venture from Singapore with the main target market as India and slowly expanding to USA.
VoloFin identified that and catered to the needs of working capital. There are standard banking solutions that are backed by collaterals and are unviable for the clients. However, as an alternative, there are factoring companies operational for over a decade but were unable to gain the required scale as they lacked adequate capacities at times.
Could you share the USP and key services?
Our fintech factoring platform undertakes all the activities from onboarding of prospective clients, supplier assessment, buyer assessment, and transaction assessment the platform is a multi-investor platform wherein the counterparty investor/counterparty can have a complete overview of the transaction. There are either monoline factoring companies in India / outside India financing these cross-border trades OR there are newly started Treds platforms, which are more of a deal sourcing platform. This brings VoloFin more akin to the market.
We are the only fintech providing end-to-end solutions, from origination to collection, including credit protection with Insurance to platform lenders.
Other than that, we do a lot for the clients(suppliers) and lenders:
- Protect the supplier against buyer non-payment risk.
- Collateral-free financing
- Best-in-class proprietary tech platform offering full-stack supply chain solutions to lenders/banks.
- Quick KYC and compliance through extensive integration with govt, courts, customs, ports, and other third-party information sources. Having linked through APIs in or platform
- Ability to underwrite buyers globally.
- Framework-based lending models with banks
Please share some of the challenges faced in your journey and how you overcame them.
Our journey started before the pandemic, and we started our operations in Singapore. We had expected that the venture would take off in a year but unexpectedly we had to pass through the pandemic phase from April 20 onwards and it was not easing out till another two years. The last four years of our journey was challenging as it is for any startup. Some of the key challenges that we faced during this phase were.
We wanted to build a strong core team in the initial phase so we started connecting with the senior management professionals working in the lending and insurance industry in the first quarter of 2020. However, as the pandemic impacted the market situation getting these experienced professionals on board was quite a challenge. Since the founders had a good professional reputation and connected on a personal level, the core team banked on them and were onboarded.
We wanted to build a fintech platform where the entire operations from onboarding to funding would happen smoothly and with a quick TAT. This platform was our USP and we opted for an independent agency to build this platform our team worked closely with these vendors for almost six months and explained user requirements and products on multiple occasions but due to frequent changes in teams at the vendor’s side our platform was not up to the mark wherein VoloFin took the decision of building a fintech platform in-house and we hired resources in designing, frontend, backend and coders in the team with our active involvement in the development phase the platform was made fully operational and now we are awaiting for V3 ( version 3) to be launched by next quarter.
We wanted to build a fintech platform where the entire operations from onboarding to funding would happen smoothly and with a quick TAT. This platform was our USP and we opted for an independent agency to build this platform our team worked closely with these vendors for almost six months and explained user requirements and products on multiple occasions but due to frequent changes in teams at the vendor’s side our platform was not upto the mark wherein VoloFin took the decision of building a fintech platform inhouse and we hired resources in designing, frontend, backend, and coders in the team with our active involvement in the development phase the platform was made fully operational and now we are awaiting for V3 ( version 3) to be launched by next quarter.
The pandemic impacted the worst but taught many lessons. Cross-border trade was impacted the most due to container movement issues globally. However, the team started building the database with a vision that things would surely work out in our way. VoloFin also subscribed to multiple APIs to get due diligence data for the sales, risk, and operations teams and which crashed the overall TAT. VoloFin was one of the initial companies, which started the use of e-signing of legal documents and made the KYC and Legal journey smoother for their clients.
Despite the challenges brought by the pandemic, VoloFin transformed adversity into opportunity, demonstrating resilience and foresight. The global disruption in cross-border trade prompted the team to proactively build a robust database, laying the foundation for future success. Recognizing the importance of timely and accurate information, VoloFin subscribed to multiple APIs, enhancing due diligence capabilities for sales, risk, and operations teams. Despite initial setbacks, this investment ultimately streamlined processes and contributed to improved efficiency. Embracing innovation, VoloFin pioneered the use of e-signatures for legal documents, revolutionizing KYC and legal procedures, and providing clients with a seamless and secure experience. Through strategic initiatives and a forward-thinking approach, VoloFin not only overcame challenges but also emerged as a trailblazer, setting new standards in the industry.
Being a start-up, the founders knew well that they couldn’t keep on pumping the equity for the business and they wanted to onboard more and more funds on the platform so that the platform could create multiple opportunities for the onboarded clients. For a new entity having these initial tie-ups with fund houses was very challenging but we were able to convince these fund houses due to; an experienced core team, strong processes and API and a good track record of the pivot transactions undertaken on the platform.
While VoloFin worked with mid-level fund houses and started to finance onboarded transactions, VoloFin also signed a term sheet in the middle of 2022 with a large fund house that was keen to invest more than USD 100 Mn in the business, and the due diligence process was also completed in a few months, however somewhere towards to the end in start of 2023, there was a fed hike in interest rates and the expectations from this fund house on returns and equity increased drastically which made the deal unviable. This was the most demotivating phase as VoloFin had built up the team, had signed term sheets of more than USD 100 Mn+, and had issued offers of USD 500 Mn+ to use the lines of the new investor. However, the team once again rose to the challenge and signed a new term sheet with one of US fifth largest banks and we expect that the financing will commence in 1st quarter of 2024. Since there was a lot of preparedness within the team in the earlier due diligence, dealing with the new investor was quite easier and smoother.
What makes you different from your competitors?
- Technology Platform -Our robust platform takes full responsibility for origination, KYC, onboarding (supplier and buyer), credit, operations, debt management and insurance wrap.
Our Platform Provides a one-stop factoring solution to Banks and Lenders
- Credit Insurance Coverages – VoloFin’s bespoke Trade Credit Insurance policy provides 100% insurance in case of buyer default. The team has extensive expertise & experience in handling Trade Credit Insurance policies and has designed the policy to meet its specific requirements.
- Wider Geographic Exposure – Our tie-up with lending partners across different countries allows us to take exposure to geographies such as LATAM Countries, that are currently not being serviced by the existing lenders.
Share some key milestones.
We established the entity in Feb 2020 and then in the initial 1 year, due to COVID-19 restrictions, we used this time to develop our platform and then started the business in mid-2021.
2021:
Reached a team size of 15, with key resources in Credit, Tech, Ops, Business Development
Crossed the milestone of USD 1mn on receivables finance from India.
Achieved a few high-volume trade businesses, earned good reference fees
Set up an office in the US.
Set up of Indian entity.
Lending partnership with a Singapore fund
2022
Team size grown above 35
Total volume achieved upwards of USD 50mn
Signed a Series A term sheet with a large US-based PE/VC firm
Accelerated the partners with more than 80 onboard, including FI, CA’s, CPA, Consultants
Lending partners in HK and the US were onboarded
Built a strong pipeline of more than USD 100mn signed offers with clients.
2023:
Onboarded India Exim Finserve IFSC Private Limited (a 100% wholly-owned
subsidiary of the Export-Import Bank of India)
The first company to undertake and complete invoice factoring transactions on ITFS Platform, an initiative by IFSCA, GIFT City
2024
Achieved a total volume of more than USD 80 Mn
Onboarding one of the largest global banks as the Lender.
What are the different strategies you use for Fintech Factoring Solutions?
- Pre-evaluation of prospects before the initiation of deals.
- Use of API’s and tools which reduces data requested from clients.
- Quicker onboarding of suppliers and buyers through e-signing of legal and operational documents
- Linking of sales – credit – KYC- operations – dunning process journey in the platform and lesser dependency on the physical documents and emails.
- Data availability to investors on the platform for the deals they have financed brings more transparency.
How VoloFin help SMEs grow and scale their businesses in tier-2 cities?
VoloFin can onboard Suppliers having export sales volumes of USD 200 K, which helps the smaller exporters to get quicker financing, protection from default of the buyer in case of willful default or insolvency, and supports their balance sheet by reducing their debt and improving debtor/ sales days. The Suppliers can easily focus on their businesses and leave the rest to VoloFin once they export their goods.
VoloFin plays a pivotal role in empowering SMEs to flourish and expand within tier-2 cities, fostering positive growth trajectories. Through tailored financial solutions, VoloFin addresses the unique challenges faced by SMEs in these regions, unlocking avenues for sustainable development.
By providing accessible and flexible financing options, VoloFin enables SMEs to invest in crucial aspects of their operations, such as technology adoption, infrastructure development, and talent acquisition. The platform’s user-friendly interface streamlines financial processes, ensuring efficiency in managing funds and facilitating quicker decision-making.
Moreover, VoloFin goes beyond traditional banking constraints, offering personalized support and insights tailored to the specific needs of SMEs operating in tier-2 cities. This approach not only enhances financial inclusivity but also cultivates an environment conducive to innovation and entrepreneurial success, thereby propelling SMEs towards unprecedented growth and scalability. In essence, VoloFin acts as a catalyst for positive transformation, catalyzing the ascent of SMEs in tier-2 cities.
Disclaimer: The views expressed here by the author are his own and do not reflect the views of Fintech Watch