Consumers have become accustomed to ordering, paying for and receiving their goods within 48 hours, but the payments to move anything between shippers, brokers and carriers
The shipping industry is prime for a payments overhaul, said Melissa Forman, president of
Shipping is a lucrative business that generates a reliable source of payments revenue. The American Trucking Association estimated that the trucking industry made $940.8 billion in revenue in 2022 on 84.7% of the nation's freight bill. That has created a market for alternatives to traditional paper-based and card payments. Competitors in the space include
Transportation fintechs will also need to compete with more traditional fleet card providers, also known as fuel cards, which have long been the primary payment technology designed specifically for the trucking industry, said Ben Danner, senior analyst with Javelin Strategy and Research.
"These cards offer various perks and discounts to fuel costs, and their value is highly dependent on the volatile fuel price market," Danner said, noting that the fleet card space has seen the launch of several vendors in the past few years.
"Many vendors are going after shares of small and medium-size fleets rather than the large marquee fleets," he said. "Companies like AtoB and Coast that are launching sleek web and mobile apps tied in with fleet management tools, [and] legacy fleet card providers such as Corpay — formerly Fleetcor — and WEX have been moving beyond fleet cards towards corporate payments and other verticals."
In the shipping industry, there are four key players that facilitate the movement of goods and materials: shippers, brokers, carriers and factoring companies. Shippers are the companies that are sending the goods; carriers are the companies that bring the goods to their final destination, such as a retail store; brokers connect shippers with the right carriers based on what is being shipped; and factoring companies purchase outstanding invoices from businesses that have slow-paying customers and need cash flow.
Those four parties run their businesses on different payment schedules, making it difficult for carriers, which are cash-intensive businesses,to operate, Forman said.
For example, shippers often pay brokers in 120 days from the completion of service, and the broker pays the carrier in 30 days from the completion of service. But carriers, who may need to repair their fleet in the event of a breakdown or even
It's a highly fragmented business, Forman said, making it a prime industry for a payments overhaul.
Dallas-based TriumphPay is looking to break that cycle by connecting suppliers, brokers, shippers and factors on one payment platform, Forman said, noting that the company is targeting a 50% penetration rate on brokered freight running through its platform by the end of 2024.
"The way we do that is we target the largest freight brokers in the country; we go after the tier two [brokers], and also smaller ones," she said. "There's value in making smaller brokers just as easy to work with as larger ones."
As of March 31, 2024, TriumphPay facilitated 44% of all brokered freight transactions, representing $25.8 billion in annual payment volume, according to a TriumphPay investor presentation.
In July, the company inked a partnership with C.H. Robinson, the largest freight broker in the U.S., which should push TriumphPay over the 50% threshold, Forman said.
"Transportation is one of those industries that has fallen pretty far behind from a technology innovation perspective and is just now catching up," she said.
"There's about 10,000 brokers in the country that do third-party logistics. There's [more than] 400 factors, 250,000 active carriers, and hundreds of thousands of shippers," Forman said, noting that about 90% to 95% of those carriers operate five trucks or less and are not "as technology enabled as you might think."
As a result, small carriers may have "teams of people chasing their payment," said Stephen Carter, director of product marketing at spend-management platform Ivalua.
"As a small business, you need to get paid to make the investment to get paid again," Carter said.
What's more, many companies moving goods through the supply chain still use paper-based methods of payment, such as putting a check in the mail, he said.
"The biggest challenge that organizations have got [to overcome] is this mentality of long payment cycles, because that is breaking the supply chain," Carter said.
