MoneySwitch, the new platform offering uncollateralized lending to cross-border payment services providers, has raised $1 million in a pre-seed funding round at a $35 million valuation.
Leading the pre-seed investment are Frax Finance, DeeMoney, Decentralized, and PIF Labs. These strategic investors and partners enhance MoneySwitch’s ability to build liquidity and widen its reach within the cross-border payment ecosystem.
MoneySwitch aims to become a leading liquidity provider helping cross-border payment providers (CPPs) achieve seamless cross-border payment services with greater efficiency by extending short-term liquidity at a fixed-interest rate.
Once borrowers pass a rigorous approval process, the CPPs can access instant liquidity from MoneySwitch’s liquidity pools, powered by stablecoins and built on the Ethereum blockchain. Permissionless transactions are actioned without the need for lenders and borrowers to negotiate collateral, rates, and tenor.
Earned interest is shared between lenders who provide the liquidity and the use of blockchain technology ensures transparency, with all transactions immutably recorded in a shared, public ledger.
The cross-border payment industry has witnessed substantial growth in the past few decades, driven by increased supply chain globalisation, economic activity, e-commerce, migration, and increased internet and smartphone penetration, with an estimated $155.9 trillion transaction volume worldwide in 2022. However, despite the market size, the industry is hampered by a legacy system that is plagued by delays, high costs, and low transparency.
The legacy payments system runs on a pre-funding model that requires a CPP to pre-fund their receiving partner in USD. A CPP exchanges local currency for USD and sends it to their payout partner as security ahead of the final beneficiary’s eventual payout. Working capital is locked up with partners, while CPPs spend time and money ensuring the correct amount of capital is in the correct place at the correct time.
Another challenge is the SWIFT network, which enables communication between financial institutions, but is paused on so-called ‘red days’, weekends and national holidays, and outside working hours, meaning CPPs see their working capital tied down for longer, increasing costs and risks.
Khibar Rassul, MoneySwitch co-founder, said: “MoneySwitch is solving the problems faced by cross-border payment providers by offering them instant access to liquidity. Our protocol ensures that CPPs never suffer downtimes due to time-zone differences, working hours, holidays, weekends, and banking ‘red days’.“
“Our pre-seed investors see the opportunities our platform offers the CPP market and we’re delighted to have them on board as we grow. The entire cross-border payment landscape is being transformed, and we are at the forefront of this revolution.”
For more information on MoneySwitch, visit https://join.moneyswitch.io