Enabling Cross-Border Payment Access for Indian Small Businesses

Cross border payments continue to hold certain challenges, making it difficult for medium to small size enterprise to expand their business foothold internationally. Complication in global payments persist due to different financial systems in different nations which are often incompatible with one another. Local transactions include simple alternatives such as bank accounts or UPI, however, foreign payments are subject to system differences.  

India Business and Trade spoke with Skydo founder Srivatsan Sridhar over the current cross border ecosystem in India and the existing obstacles it holds for small businesses such as disproportionately high cost of international money transfers. The entrepreneur believes there is a demand for solutions that make international trading easier and less expensive.

The Bengaluru-based tech company is helping Indian businesses make their way across the wide world of international payments. Srivatsan claims that since 2022, it has extended its services to an increasing number of areas, facilitating money collection from 32 countries, including key nations from which Indians commonly receive funds.

Photo Source: Skydo

IBT: Tell us a little bit about the company Skydo and what are some of its course trends when it comes to cross border payment?

Srivatsan Sridhar: Skydo was started in 2022. We are a year and a half old and our product has been live for the last one year. What we are trying to do is to assist really small exporters who lack the convenience of a large finance team or deep banking relationships, enabling them to still enjoy high-quality service when it comes to their cross-border payments. What we mean by that is offering them transparency, convenience and compliance in their cross border payments which currently they don’t receive in the existing channels. Their existing options are either swift or other wire transfer modes through the banking channel or payment platforms like PayPal or Payoneer. Each of them have their own challenges and overall a small customer is left either overpaying for Forex or managing the entire payment process in a very cumbersome manner or having to face non-compliance issues on taxation. We try to solve all of these things.

IBT: There are quite a few competitors in the market who specialize in crossborder payments. What sets your company apart from them?

Srivatsan Sridhar: While there are many companies, it is also a very complicated market in the sense that all payments are not the same. So, consumer payments are very different from business payments and even within consumer payments peer-to-peer consumer payments are very different from consumer to merchant kind of online checkout payments. Most of the large competitors who are there in the market, especially in the consumer payments domain like PhonePe or GooglePay and so on, are not for business to business (B2B) payments. On top of this if you add the complication of international payments, and then there are fewer competitors. The real competitors are only PayPal, Stripe, Payoneer etc. on the global side and one or two other smaller companies who have started along with us. The other platforms that are not actually a significant competition, the real competition comes from the banking system and what sets us apart is our focus. We are very clear that large enterprises have multiple solutions and they are very well served.

Therefore, we concentrate on serving the long tail of small businesses, including freelancers, sole proprietors, gig workers, and similar individuals. We also target small companies with 30 to 60 members, where operations are heavily driven by founders or entrepreneurs. This is where we identify the most significant lack of convenient options, and it’s precisely where we are focusing our efforts.

IBT: What are some of the persisting challenges you think there are in cross border payments in the domestic market at least?

Srivatsan Sridhar: The first complication is that banking systems across different countries work slightly differently. They are not entirely compatible. Today, when making a payment to a merchant, such as booking a train or bus ticket, it’s relatively straightforward because I can visit the checkout page, which offers a variety of payment options. I can choose to pay through my bank account, credit card, UPI, and more. However, when attempting to make a similar payment in another country, it becomes more complex because each country has its own payment systems, and these systems often don’t seamlessly communicate with each other. This is one of the reasons why credit cards continue to be widely used around the world. They are the only common link. A credit card number and a pin number are like a very common thing. Even there for example India has a two factor authentication, some other country will have some other system. So, first reason for global payments being complicated is that there are different systems in different countries which don’t necessarily talk to each other. Second is that the pricing to move money is unfairly expensive. I mean the reason I say unfairly is because there is no real cost to move money. But there are lots of artificial barriers set up between countries which make it very expensive. If you take the swift system which is the most commonly used international payment system, there is no standardized fee that companies should charge or can charge. Some bank might charge $20 for a single swift, while other banks might charge $35, or $5, you don’t even know it beforehand. Similarly, the Forex fee markup a large company like a Reliance might be able to get away with paying just one basis point for transferring a large sum of money, whereas a small exporter who is the typical Skydo target customer might even have to pay almost two rupees for every dollar as a FX markup.

IBT: What kind of technology infrastructure do you have and how does it help facilitate cross border payment especially for smaller companies?

Srivatsan Sridhar: One of the most fundamental technologies is what we call the rail or the network on which money moves. Today we have bank rails which means that all our money moves from one bank in one country to another bank in another country. In this case, the receiving country is India and the sending countries are all over the world. So, the first rail Skydo has built is, partnerships in multiple countries and such that an Indian customer can use the KYC, KYB of India to be able to open collection accounts in these multiple countries through Skydo. This gives them a local presence in several markets and through this local presence their customers can pay them locally in those markets. Skydo brings that money into India. We collect it together and bring it into India. We do the conversion with our partner bank and then we send the money in INR to their accounts through NFT, RTGS. So this entire rail of being able to collect money in another geography, pull it together, bring it into India, convert and then distribute is the first thing that we built. Then over time we are adding other rails to this like credit card rails, there are UPI type of rails in multiple countries. There are instant payment rails in every country. So we are trying to build those also. Over time the number of rails that Skydo will have and the number of countries in which Skydo will have rails will keep increasing. That is one dimension of the product that we are building.

Then, the second dimension of the product that we are building is one on trust and compliance. As you can imagine, payments is a very regulated business. Cross border payments is even more. Primarily to prevent the risk of money laundering, terrorist financing and other kinds of unlawful activities, to weed out bad actors in the whole system whether in the sending end or the receiving end, to protect customer data as well as to protect regulatory requirements on compliance, we have built a compliance suite.

The other part of compliance is then data privacy to make sure that all the information that we collected, personally identifiable information is not leaked out, all of this is protected and consumer privacy is protected. The final part of it is transaction monitoring. When the transaction happens making sure that risk monitoring systems are automatically set up so that even as we keep scaling, like when we started, we used to do one payment a day now we are doing 30- 40 payments a day. Soon we will be doing 300 payments a day.

IBT: In a short span of one year, Skydo has expanded its services to 32 international regions. In the coming year in 2024 what is the plan of expansion of your company?

Srivatsan Sridhar: We look at expansion in two dimensions. One is more customer segment expansion and second is capability expansion. On customer segment obviously today we are serving a certain TG. We also want to serve more TGs like manufacturing exporters, e-commerce exporters, then large companies which are themselves platforms and we help them in their payment as a embedded offering. So this is one dimension in which we want to expand in 2024 that is to be able to go to e-commerce exporters, manufacturing exporters and large companies where we can become an embedded payment offering. Then the second dimension of expansion is capability expansion. Today, we offer receiving money into India from a set of countries through the banking channel. Apart from banking channel, we are currently building a credit card channel. Then we will expand from 32 countries to a few more countries. The third part is we are only receiving money into India, but we are also gearing up to take our initial steps towards enabling money transfers from India, simplifying the process for our users.

These are the three things that we will focus on next year.

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Srivatsan Sridhar is a mechanical engineer and an MBA graduate from the Indian School of Business. Skydos founders Srivatsan and Movin Jain are both techies passionate about building internet products and platforms that make people’s lives easier. In 2023, the cross-border payment company raised US $5.2 million in a seed round led by Elevation Capital.