How 40Seas solves cross-border payment issues

With 40Seas, Eyal Moldovan believes he has solved a cross-border payments issue hindering importers and exporters who are already contending with a rapidly changing environment. 40Seas is a cross-border, digital financing solution that allows firms to “order now and pay later” in different time frames. They help buyers immediately get the products they need to grow while removing the risk for the sellers. The company recently raised $117 million, which included a $100 million credit facility with ZIM.

Moldovan brings 15 years of fintech and payments experience to 40Seas. During a decade at Payoneer, he split his time between VP of business development and general manager of Payoneer Direct Business. 

In the lead-up to 40Seas, Moldovan and his partner interviewed importers, exporters, freight forwarders and port operators about their shipping and supply issues. They learned that difficulty agreeing on payment terms plagued the industry while impacting growth. Current solutions were outdated, with both sides of a transaction being underserved.

“We fell in love with the problem,” Moldovan recalled.

Investors saw the issue and were intrigued by how 40Seas proposed solving it. More executives joined the founding team, including someone from China and a risk professional from Canada. The Chinese partner brought valuable input from an important global manufacturing and shipping hub.

The result? A solution allowing exporters to offer payment terms and workflow to foreign buyers without assuming any risk. If done correctly, it could go a long way to closing what Moldovan said is a $5-$7 trillion financing gap in SME cross-border trade.

Why factoring falls short

Factoring has attempted to address this problem. Moldovan said it has failed mainly for one reason: software.

“If you’re building software expertise and a good workflow, there are tons of great opportunities that you can tap into right now that were not addressable because there’s not a good solution out there,” Moldovan said, adding that clients with international customers don’t often know how to underwrite. Credit insurance doesn’t meet their needs either.

Open data, automation and a pandemic – why the timing was right for 40Seas

Moldovan outlined several reasons that made the timing right for 40Seas’ entry into the market. Open banking brings access to more data, and SMEs are willing to share it. That wasn’t available two years ago. It makes it easier to add foreign buyers.

Eyal Moldovan said several factors have contributed to 40Seas’ early success.

Increased automation is another factor. That simplifies the process of adding debit and credit accounts. Payment structures for underwriting have improved. More fintech companies are tackling these issues.

COVID-19 also had a role. It spawned a digitization surge and a willingness to embed software.

Through the early months of the pandemic, exporters had bargaining power, thanks to a goods shortage and low cost of capital. But as interest rates and inflation rise, the cost of capital is growing. Bargaining power is shifting.

“And all of a sudden, if exporters want to compete, they need to offer longer payment terms to the foreign buyers,” Moldovan said. Add businesses transitioning to second and third generations who are more digitally comfortable, and you have a conducive environment.

How 40Seas works

Imagine a prospective customer who wants to switch their business to you but needs net 60 terms. How does your company assess their risk? You’ve already paid for your inputs, but they’re delaying paying for your outputs. That can slow your firm’s growth.

Enter 40Seas, which sits in the middle to provide value to both sides. Both sides see the complete invoicing process in a report through its software.

Moldovan said 40Seas is well-positioned to help companies adapt to shifting supply chains. Chinese factories are adding operations in Cambodia, Thailand and Vietnam. That process is being repeated worldwide. 40Seas is a multilingual solution whose network grows as more entities on both sides are added to it. It welcomes multiple locations, suppliers and buyers into a single software system. 

The process is similar when adding payment providers. Moldovan said 40Seas leverages the best-of-breed in each region.

How AI will help

Looking ahead, Moldovan said he is excited about Generative AI’s potential to leverage data such as trade history, import/export figures, transaction data and third-party numbers related to containers and bills of lading. Predictive AI will help score new businesses with little history.

“The real magic is how you combine everything into a decision-making logic,” Moldovan said. “And if you combine software to measure things in the process, then this is where the real magic begins.

“The companies of the future will be companies that can adapt with fewer people and with the assistance of AI… It’s not making the decision but giving you the recommendation.”

  • Tony Zerucha

    Tony is a long-time contributor in the fintech and alt-fi spaces. A two-time LendIt Journalist of the Year nominee and winner in 2018, Tony has written more than 2,000 original articles on the blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has hosted panels at LendIt, the CfPA Summit, and DECENT's Unchained, a blockchain exposition in Hong Kong. Email Tony here.