“Financial institutions present major bottlenecks in trade”
ODeX’s Co-founder & COO shares the challenges of navigating financial bottlenecks in trade, highlighting the need for better solutions in B2B payments.
In the vast and complex world of international shipping, an Indian startup has been quietly making waves, transforming how stakeholders interact in the container shipping ecosystem. ODeX has evolved from a local Indian enterprise to a global player, navigating diverse markets and overcoming unique challenges along the way.
In an exclusive interview with Indian Transport and Logistics News (ITLN), Binai Thoppil, Co-founder & COO of ODeX, shared key insights such as how the company is leveraging technology to simplify ocean trade, their experiences in different global markets, and their perspective on the industry's digital transformation. He also highlighted the company’s expansion plans, particularly in the African market.
What does ODeX do, and what problem does it solve? What is your vision?
ODeX is a digital portal focused on containership operations. We connect multiple stakeholders in the container shipping ecosystem, including importers, exporters, and shipping lines. Our platform simplifies the complex interactions that occur during the transit of cargo from a shipper's warehouse to an importer's warehouse. Typically, there are 8 to 14 different interactions between various parties for each shipment. ODeX brings all these parties onto a single portal, allowing for seamless communication and payments.
Since our inception in 2015, ODeX has grown significantly, now handling a substantial portion of India’s container traffic on both the export and import sides. We manage at least one document for 60-70% of containers exported from the country, with similar coverage on the import side.
We aim to be a medium that simplifies ocean trade. Our goal is not to create a monolithic portal, but rather to enhance communication among various stakeholders in the industry. This vision drives us to work in the background, building connections, establishing effective business logic, and ensuring that the right message reaches the appropriate stakeholder at the right time.
Are you the first platform of this kind, or do you have competitors in the market who also provide similar portal solutions?
In terms of competition or peers, I would say that some may offer specialised solutions in areas that we don't focus on. While we do have competition both in India and outside, the market is relatively small, with few players providing similar services. Rather than viewing everyone as competitors, we often collaborate. For example, in the US, we have partnered with PayCargo and we use PayCargo as one of the payment methods in the US.
The shipping industry is largely oligopolistic, with a single company often controlling around 90% of global trade. The top five to seven shipping companies manage approximately 70% of the container traffic that moves across oceans. Similarly, in the digital space, most countries have only one or two — rarely more than three or four — portals offering similar services. When there are too many platforms, the value of consolidation is lost, along with the synergies, leading to a fragmented market.
What challenges does ODeX face in different markets?
The most challenging market for us has been the US, particularly in terms of financial institutions. Surprisingly, despite being a technologically advanced country, the US still relies heavily on interbank transfers that can take up to 48 hours to effect. This slows down business considerably.
We see major bottlenecks not just with trade-related entities like shipping lines or customs brokers, but primarily with financial institutions, such as banks and payment gateways. This is surprising, as we would expect them to be more nimble and efficient. Most financial solutions across multiple countries tend to focus on B2C payments and settlements, while B2B solutions have not developed at the same pace. Consequently, even if we have a portal that efficiently manages documentation, we are still left behind if financial transactions do not move at the same speed.
How complex is it to navigate the regulatory norms across different countries, especially when operating in diverse markets like Africa, the US, and others? How challenging is it to adapt to these varying regulations?
When entering a new market, it takes some time to understand and adapt to local complexities. However, we benefit from established relationships with the same shipping lines that we work with in other regions like India, UAE, or Ghana. These familiar stakeholders act as anchors, helping us navigate local regulatory norms, compliance requirements, and even practical matters like finding office locations. Their local knowledge eases our journey, not just in terms of customer acquisition but also legal processes and other logistical details. In larger markets like the US, the process can take longer due to the market's size, requiring more investment and time.
Tell us about your presence in the African market?
We currently have a presence in Ghana, Nigeria, and Senegal in West Africa, along with South Africa and Kenya in the east. By 2024, we plan to expand by adding Uganda, Rwanda, and Tanzania. These countries are in the pipeline, bringing our total coverage to around five or six nations in Africa.
We are focusing on sea-facing countries in Africa, with Mozambique expected to join our network by the first quarter of next year. We're also planning to expand to Djibouti in the north and Angola in the west. These are key markets we are targeting, and we remain optimistic about growth opportunities in Africa. We've found African markets to be quite nimble and open to innovation, especially in the financial sector.
Do government policies have a significant impact on your business? Specifically in India, are there any policies that particularly support or hinder your operations?
Government policies can present both support and challenges for our business. While we primarily interact with private parties like shipping lines and port operators, our industry operates under significant regulatory oversight, including customs and shipping authorities. For instance, a recent regulation in India, Sea Cargo Manifest, and Transhipment Regulations (SCMTR), aims to enhance simplicity and transparency in trade by changing how container manifests are filed. This is beneficial as it requires us to innovate and help organisations adapt.
However, some regulations can be threats, such as mandates that transactions must occur through government portals, which we have observed in certain African countries. Such regulations can reduce our transaction volumes, as experienced with a recent change in Dubai ports that shifted the collection of Terminal Handling Charges (THC) directly to ports, resulting in a 30% drop in our business.
We believe that a balance is essential, where both government and private players have distinct roles to play within the regulatory framework.
Is ODeX Pay Later an in-house built platform, or is it a partnership with another company?
ODeX Pay Later is not an in-house built platform, rather, it is a partnership with various financial institutions. Initially, ODeX partnered with a Non-Banking Financial Company (NBFC) in India to pilot a cash flow management solution, and now the programme is run by DBS Bank. It allows agents to manage short-term financing needs without using their own funds, providing flexibility and supporting growth by preventing them from being out of pocket for extended periods.
How is ODeX leveraging new technologies?
We're exploring the application of AI principles in certain areas to help our customer service better. However, we're particularly bullish about blockchain technology. We believe blockchain will become very popular in this industry, especially with the introduction of electronic bills of lading (eBLs) by 2030. We also initially experimented with blockchain technology in 2018 to manage KYC processes. While it was ahead of its time, we believe that today both the industry and consumers have a better understanding of blockchain technology.
