Today the cross-border logistics plus payments stack is broken for merchants under $10-20 mn of revenue.
Much like sewing together a patchwork quilt from scratch, these merchants today have to stitch together Shopify, ShipBob, UPS, Avalara, Wise, local import brokers, customs paperwork, random tax agents, and then sit down and pray nothing gets stuck at some border.
Economically speaking, landed cost miscalculation is also painful: overcharging kills conversion for merchants, while undercharging eats up margins. Trying to do this yourself eats up valuable time.
Customs classifications are a black box, HS codes are arcane, and the wrong code once again costs time and money.
Returns are pure chaos, and even something as simple as understanding and optimizing FX spreads is daunting for merchants.
And if you are an SMB, bigger players like the shippers or Global-E don’t really pay too much attention to you.
An AI driven platform can change all this, and Swap Commerce, where we led the Series-A is already tackling this with great success.
The vision for Swap is clear:
- A real time accurate landed cost calculation (including duties, VAT, brokerage fees, etc.) delivered in milliseconds during checkout
- Customs and compliance automation with the correct import/export declarations and registrations handled smoothly and quickly
- Payments and FX bundled, also offering local payments methods, even acting as the merchant’s cross-border PSP
- Orchestrate all logistics including shipping labels, duties paid options, returns routing, and warehouse integrations
- A returns clearinghouse that can offer in-country consolidation hubs and allow cheaper returns
- Localizing pricing, currency and tax display on a country-by-country basis
- Fraud and risk management by tracking cross-border specific false positives and false negatives a traditional PSP may miss.
The regulatory volatility today, starting from tariffs and stretching back to Brexit all have created an even more urgent need to solve this pain point. And AI is making compliance automation solvable in a way it had never been up to now.
So, we are understandably very excited about the prospects for Swap. As we continue to scale up, what appears to be a workflow tool also reveals crucial network effects. HS classification training sets, customs and return data, lane-level logistics performance data all give Swap an edge that gets even stronger as it scales.
We will look at other AI driven fintech opportunities in future blogs, and analyze some of the common themes that emerge from these opportunities, but by ways of a spoiler alert, Swap is an example of two very salient themes that are emerging in fintech AI:
- Combining the power of AI with a deep understanding of regulation & compliance, and
- Using AI, automation, payments rails etc. to present a bundled solution to the customer as opposed to just the individual components of software or automation or payments.
Another way to think of the above is that the fintech winners of tomorrow will combine AI & automation, an understanding of regulation & compliance, and embedded finance into one solution. We can think of this as Solution-as-a-Service, and the companies, like Swap, that deliver the best will be the winners.
In future blogs we will look at how these themes will transform other areas such as AI driven treasury ops, real-time compliance oversight at regulated entities, AI driven NPL solutions, and many more.
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