International trade, and trade finance, has long been dominated by what might be called the paper chase – the documents, the signatures, the invoices that slow down everything from ordering goods to getting shippers, truckers and exporters paid once the transaction is fulfilled. And it’s a situation that has its most acute pain points in the over-the-road movement of goods at the U.S. border with Mexico.
“It’s the biggest trade line in the world today,” said Chhugani in a recent interview with PYMNTS. “Up to 11 million truckloads cross the border every single year,” accounting for hundreds of billions of dollars of merchandise annually. It’s a process that can involve anywhere from seven to 12 different stakeholders that a company must deal with before goods get to their final destination, spanning trucking companies in both countries, paperwork at the border and other touchpoints.
To that end, Nuvocargo, a digital platform focused on U.S./Mexico trade, said earlier this month that it closed a $12 million round of Series A funding from a consortium of backers led by QED Investors. The firm said in a release detailing the funding that it will use the money to accelerate its product roadmap and ramp up hiring, while it continues to develop a range of financial products for shippers and carriers in a supply chain finance market that tops $125 billion.
Paper-Based Communications And Interactions
Most of the communications and interactions among those stakeholders are done through analog and inefficient means – including faxes, phone calls and (perhaps) email, the CEO told PYMNTS.
“You’re dealing with different currencies and different languages, so these processes can become quite complicated,” said Chhugani. Nuvocargo has set up a one-stop-shop of compliance and insurance policies, along with bilingual teams, in an effort to build a transportation network in both countries, with software as a foundation. The result is akin to an experience where one orders from Domino’s or Uber Eats, with the ability to track progress online, from ordering all the way through to final delivery.
The tech-enabled process, with Nuvocargo as an intermediary, “results in better visibility,” said Chhugani. “Companies can hire fewer people in their import-export departments and gain more visibility on finances.”
And drilling down into supply chain finance, he said that typically, firms will want to pay on terms from 30 days to as long as 90 days. It becomes challenging to coordinate the movement of paying for goods on a country-by-country basis — and it is also a challenge to pay for the transportation expense.
“If you have to pay a trucking company in Mexico in the U.S. and all these vendors when you deal with Nuvocargo, you have one invoice, and all of that payment volume flows through us and through our platform,” said Chhugani. “We already do the hard work of building a relationship and onboarding the trucking companies and the vendors in Mexico and the U.S. … we are already eliminating a lot of risk that a financial provider would need to underwrite if they were trying to give you a loan.”
Nuvocargo, by way of example, can pay the Mexico-based exporter (typically an SMB) 95 cents to 98 cents on the dollar for an invoice, and take on the risk (and margin) on collecting on that invoice. As Chhugani noted, the firm has been creating financial products to enable clients to get paid faster — a new business line that will enable users to have healthier working capital.
With a nod to the overall trend toward digitization, he said, Nuvocargo’s clients are discovering that moving goods (and getting paid) with greater transparency is a strong incentive to embrace technology.
“If we are moving goods for them, and we give them software to give you better visibility – and better control of all your documents, and everything that happened in the shipment — that’s how you get them to adopt [technology], because that’s information they otherwise would have asked you for in an email or a fax, or some other analog method,” Chhugani told PYMNTS.
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