Mumbai-based fintech TransBnk has raised $1 million in a seed funding round led by early-stage India-focused venture capital (VC) fund 8i Ventures. Other participants in the capital raise session included Growthcap Ventures, Leadway Ventures LLP and Growth Sense, along with some family offices, institutions and angel investors.

This capital infusion will enable TransBnk to bolster its product and technical teams, enhance its tech stack, and expand its product line. The start-up aims to reshape the management of specialised accounts and B2B payments, which are the foundation of lending ecosystems, capital markets, supply chain finance, and treasury management.

Vikram Chachra, the founding partner at 8i Ventures, said, "TransBnk is filling a crucial gap between the technology 'haves' and 'have-nots' in India's trillion-dollar transaction banking landscape. By providing a disruptive solution to the financial ecosystem, they are strategically positioned to bring a seismic shift in transaction banking. This investment aligns with our commitment to support ventures that redefine the fintech landscape."

Since its inception in April 2022, TransBnk has positioned itself as the go-to solution for financial entities trying to navigate complex, multi-party transactions such as digital escrows. The fintech has partnerships with over ten private banks, including IndusInd Bank and Aditya Birla Finance and serves more than 50 corporate, institutional and fintech clients. 

These entities have adopted its technology platform to manage their capital flows in co-lending, lease rental discounting, etc. With the seed funding acting as a catalyst for its journey, TransBnk aims to triple its client partnership by March 2024.

In a conversation with Outlook Start-Up, Vaibhav Tambe, CEO and co-founder of TransBnk, stated that the fintech's products are live at over seven banks. "We are also engaging with over 50 businesses for various collaborations and implementations, of which more than ten have resulted in agreement executions. TransBnk aims to make around 18 banks live and at least 100 businesses as our customers by the end of this financial year," he added. 

Over the last couple of years, the Reserve Bank of India (RBI) has issued new regulations that significantly overhauled the transaction banking sector, estimated to be worth $1 trillion in 2019 by McKinsey. Traditional banks, encumbered by legacy systems, have been grappling with the challenges of meeting the new regulatory requirements for complex multi-party transactions. 

Talking about some of the monitoring and regulatory requirements that multi-party transactions must now follow and the challenges it poses to the financial community, Tambe stated that those involving escrows or nodal accounts have many parties performing distinct roles. In India, there are no specific regulations dedicated to such accounts, but there are laws and regulations that govern their operations. 

For instance, the Payment and Settlement Systems Act allows RBI to frame guidelines for the various payment systems and participants of such payment systems, while the Foreign Exchange Management Act (FEMA) guidelines regulate the country's payment systems. The Prevention of Money Laundering Act also defines how transactions in the financial industry can take place, while the Data Localisation Bill defines the storage of transactional data.  

"When we add the importance of system stability from the financial institutions' perspective, banks have proactively performed well to ensure system stability," Tambe added. "However, this stability has come at the cost of customer enablement." 

It is because banks use legacy systems, which introduce many inefficiencies and friction in the system. This has resulted in a scenario wherein a product with high market demand often has low market penetration. "Escrows or nodals have become a highly specialised field wherein very few experts exist," Tambe pointed out. 

Sensing this challenge as an opportunity, TransBnk engineered a programmable transaction banking system that empowers any financial ecosystem player to manage multi-party transactions in a compliant manner. Its flagship TrustHub solution offers multi-party transaction workflow, ensuring transactions in a secure environment for the financial industry. 

"Our product utilises technology to enable digitisation of large parts of escrow processes, sharing of information with multiple parties simultaneously. We bring transparency and efficiency to the system," Tambe affirmed.