LiquidX is eyeing success as a white-label provider of back-office solutions, after abandoning its origination-focused platform model, which put the firm in direct competition with its financial institution clients.
The New York-headquartered fintech launched operations in 2016 as an origination platform, competing with the likes of Taulia, Orbian and PrimeRevenue.
But in 2022 and 2023, LiquidX moved away from the model, closed its offices in London and Singapore and joined the fray of software vendors targeting banks and asset managers active in trade finance and working capital.
The origination structure “was doing okay, but we were not growing”, chief revenue officer Dominic Capalongo said in an interview. “So we stopped originating corporate deals.”
Capalongo added that the company, partly spurred by its long-term investor Broadridge, “deliberately exited the origination model because it creates an inherent conflict: a technology provider should not compete with its own bank and asset-manager clients”.
Instead, LiquidX now focuses on three modular products that can be bought together or separately: a front-office solution for receivables, payables and asset distribution; a middle-office risk management and reporting function; and a back-office payment processing and reconciliation tool.
Almost 80% of LiquidX’s transaction volume came from its white label solutions last year, the company said in a data snapshot shared with GTR, with white label transaction volume reaching over US$20bn.
Around two-thirds of transactions last year were for investment grade borrowers, but the company said high-yield transaction volume is growing faster. The bulk of transactions are for supplier-led financing.
The business plan switch to software has led to “unit-level profitability” and positive gross margins, Capalongo said. “We expect to achieve profitability in the near-term given the strong top-line growth and client wins we are continuing to see in our software-as-a-service business.”
LiquidX let several employees go in 2023 when it switched business models, including most of its European staff. Though it retains a presence in some markets, Capalongo said the company has no immediate plans to re-open an office in Europe, but may do so if projected sales come to fruition.
“We’re still focused on it [Europe], we’re doing business in terms of selling the technology over there,” he said. “So we definitely do have plans to continue to focus on the space. And if things continue to play out, where the things in the pipeline come to fruition, we will be expanding the team over there.”
Earlier this year LiquidX announced it would set up operations in France under managing director of product Alison Kao, who said the European market “presents tremendous opportunities for trade finance innovation”.
Active asset managers
Almost a third of transactions facilitated by LiquidX last year – amounting to US$7.9bn – were carried out by asset managers, the data snapshot showed. Initial figures shared with GTR suggest the share will be slightly higher for 2025.
The company has seven asset managers using its tools for their trade finance lending, Capalongo said, including Pemberton Asset Management and Evolution Credit Partners, which are mostly using the platform to manage trade finance, working capital or asset finance transactions they have originated.
Capalongo said there had been little impact on asset managers’ appetite for trade and working capital assets from the alleged fraud at US automotive wholesaler First Brands. Several funds and platforms face large losses after the firm entered bankruptcy protection earlier this year with debts of over US$11bn.
While some investors in the asset class have “paused”, he said, the headline-grabbing scandal has also had a positive impact by deterring investors that wanted to allocate funds to trade finance despite having little understanding of the asset class.
