A perfect storm has been brewing for FreightTech.
High demand has led to low inventories, creating a response from visibility technology companies looking to improve supply chain resilience.
Increased orders from customers have forced shippers to look at ways to optimize capacity, turning to digital players that use automation to consolidate shipments and find carriers where no one else can.
Shippers looking to play technology catch-up have strategically partnered with planning and order management software just to manage the chaos.
While these FreightTech segments are hot for investors, supply chain professionals are relying on a different technology segment to support their growth and working capital — fintech.
The logistics community has seen a number of fintech funding raises and new product development in the past few months dedicated toward improving liquidity to support company scale, new markets and services.
Here are five FreightTech companies that have leveraged their fintech offerings for shippers, brokers and carriers looking for sustainable growth.
Relay aspires to simplify lumper payments
An exasperating process in a supply chain is the facilitation of lumper remittance.
Lumper fees, a payment initiated at a receiver to cover the cost of a laborer who unloads a truck, frequently are unplanned expenses for all parties involved with shipments delivering at warehouses and distribution centers.
Contracted carriers find themselves arriving at facilities that need lumper services, being asked to pay cash or check to get their trailers unloaded, with fees ranging from $25 to $500 depending on the amount of labor involved.
Very much like business travel expenses, these unplanned fees are often paid directly out of the driver’s pocket to avoid having to unload themselves. In the meantime, drivers find themselves on the road, low on personal funds until fleet managers, dispatchers and brokers are able to release reimbursement for payment.
According to a studies conducted by the Owner-Operator Independent Drivers Association, 60% of owner operators surveyed said they have used lumpers at grocery warehouse deliveries, with 9% of those surveyed saying they did not receive reimbursement for those fees.
For logistics providers, these fees tend to go undisclosed until it’s time for Accounts Payable to send payment to the carrier, making it difficult to judge cash flow accurately.
While the shipper often avoids direct consequences for these tangled payment operations, any issues with facilitating a lumper payment at delivery can lead to an upset customer.
To make the lumper payment process simpler and more transparent, Atlanta, Georgia-based Relay Payments has officially raised $43 million since mid-2020, with U.S. Securities and Exchange Commission filings showing it is on its way to secure $60 million more.
“This is a trillion dollar industry that still conducts their payments manually, and the market is ready for a change. We’re providing real value to our customers across the ecosystem, eliminating friction and getting drivers back on the road,” said Spencer Barkoff, co-founder and president of Relay Payments in a company release.
The company’s electronic payment platform has already partnered with less-than-truckload carrier Old Dominion Freight Line (NASDAQ:ODFL) to digitize the payment and reimbursement process of lumper payments for its drivers.
“We have entrusted Relay to process millions of dollars in volume annually and we’ve already been able to realize millions in savings through data integration, digitalization of receipts and simplified reimbursements. On top of it all, our customers are happier than ever, which is the most important part to us,” said Todd Polen, vice president of pricing services for the LTL carrier.
Related: Relay Payments plans to raise $60M for lumper remittance platform
RoadSync innovates logistics transactions
Atlanta-based RoadSync offers a payment network with similar ambitions to Relay, facilitating more of the day-to-day payment transactions that carriers, warehouses and towing companies manage.
While RoadSync does offer lumper payment solutions, its goal is to leverage its network of asset-based supply chain operations attempting to manage their books with impromptu expenses.
Its Checkout API can apply its innovation as a part of previously established accounting technology stacks, enabling its customers to send digital invoices that accept credit cards and fleet checks.
Using its network of repair and towing companies, truck drivers can use RoadSync’s BigRig411 to locate the closest truck service facility, lowering the carrier’s potential downtime while eliminating the anxiety of how payment will be provided for the repair service.
“RoadSync is committed to providing solutions that both increase efficiency in trucking and advance the industry as a whole. We see BigRig411 as one driver of this advancement, and we look forward to growing the directory and expanding its access further,” said RoadSync CEO Robin Gregg.
In June, RoadSync announced it had closed on $30 million of funding led by Tiger Global to continue building payment solutions for logistics providers at every link in the supply chain.
Melio says ‘yes’ to every form of payment
Payment solutions problems do not limit themselves to just unexpected charges, as many logistics providers find the industry’s lack of invoicing and payment standardization can cause major hurdles for accounting departments for shippers, brokers and carriers alike.
In current markets, when rates have met their peaks, payment terms are often used in leveraging rates and available capacity, straining cash flow for shippers and logistics providers that aim to provide high-impact customer service.
What payment terms logistics providers can offer also could affect the type of shippers they can work with and how they onboard better carrier capacity to improve their transportation offerings.
The payment platform Melio realized these payment solutions were affecting the way small to midsized businesses could compete with large enterprise businesses.
To eliminate payment and invoicing concerns, the company created a platform that lets its vendors, suppliers and customers choose how they want to invoice and be paid with the ability to integrate into already existing payment systems.
This payment ecosystem landed the U.S.-Israeli company a $250 million Series D investment and a $4 billion valuation as it builds products to lower the barrier of entry for all industries.
“Payment is a consumer experience. You should be able to set up your carriers in the way they want to receive funds,” said Victor Ofstein, strategic markets and logistics specialist at Melio.
“There is always going to be a case for multiple payment solutions in logistics and that creates a complex problem. Our mission is to help small businesses’ processes, particularly accounting departments, be less complicated and more efficient.”
CloudTrucks gives carriers credit
While many fintech providers enable better payment solutions, other FreightTech companies have applied financial solutions to their base offerings to provide a full suite of products for new companies to grow with.
CloudTrucks is one of those examples. The technology-driven trucking company raised $20.5 million in December to facilitate the building of its product offerings, including Virtual Carrier, a program that supports drivers looking to become an owner-operator leveraging the company’s authority, and Flex, an owner-operator suite of products for drivers not under Cloud Trucks authority that includes access to Virtual Carrier’s Business Intelligence Dashboard to find loads and manage their small businesses.
CloudTrucks also announced recently that both of these programs would be facilitated with its own payment solution, CT Cash Card.
This Visa card offers carriers a low-cost solution to quick payments and drivers a way to pay for on-the-road expenses without having to use personal credit cards. With real-time eligibility checks and funds deposited in minutes, the company’s cash card helps drivers get paid instantly without fear of reserved decisions often seen from large factoring entities.
Related: CloudTrucks’ new offerings available to all owner-operators
CloudTrucks co-founder and CEO Tobenna Arodiogbu explained that this CT Cash card was not the last of its fintech products as the company continues to build tools to help owner-operators manage their cash flow.
“Our goal is to bring some of the advancements that we have seen in [banking] fintech over the past few years to the trucking world,” he told FreightWaves.
“We ask ourselves, ‘What are tools that can help owner-operators expand their revenue? What can we do to help reduce their costs?’ The CT Cash Card, combined with the Business Intelligence Dashboard, is all about cash flow improvement. … Spending management will be coming soon and small fleets will be able to issue cards to drivers with spending limits along with the ability to send them funds instantly for unexpected expenses,” Arodiogbu said.
TriumphPay, HubTran highlights need for automation
Fintech does not always mean providing those with access to financing to improve cash flow but instead automate back-office processes to get more compliant invoices out the door to customers while simultaneously managing payables better.
The following scenario happens too often in logistic provider offices.
A shipment is delivered on time with no issues. The carrier is only able to send in invoices via snail mail, leading to a longer invoicing process to the customer. On the due date of that invoice, the shipper tells the logistic provider it was the right bill of lading but, per a shipper agreement, needs a shipment number on the invoice.
Once the logistics provider representative finds the correct shipment number, the provider is given a new payment date, 30 days longer, while already paying the carrier 15 days ago.
That issue, happening multiple times a day at an average logistics provider, makes it much harder for companies to manage cash flow and scale its business.
This problem can be fixed with some current automation offerings available, such as the recently acquired FreightTech stack at HubTran.
Bought by TriumphPay, a division of Triumph Bancorp (NASDAQ:TBK), in June for $97 million, HubTran helped companies automate invoice auditing processes by combining machine learning technology with a human-centric approach toward improvement.
While TriumphPay has a strong footprint in transportation factoring, it lacked the automation that fintech had fixed for other industries including settlement processes.
“The network will be open to all joining participants and will provide tools and services to create frictionless presentment, settlement and payment of invoices in transportation. The future of freight payments looks very different starting today, and we are excited to bring this transformational product to the industry for the benefit of all participants,” said TriumphPay CEO Jordan Graft.
The combination of strong, intelligent automation with a factoring company that had already built trust among its carrier partners created an enticing entity for building carrier partnerships.
A few weeks after the close of the TriumphPay-HubTran deal, digital transportation provider Transfix announced it was partnering with TriumphPay to enhance the payment process for its carriers.
This partnership will enable carriers to invoice and receive payment status directly through TriumphPay, limiting the amount of human capital needed to provide this same service within its own four walls.
Outside of back-office automation, this partnership will improve carrier operations at the company as it eliminates the tedious onboarding processes and gives carrier representatives leverage when negotiating rates and volume transactions with its transportation providers.
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