We’re going to take some time today to discuss FinTech and its impact on the industry of transportation and logistics. FinTech, if you’re unfamiliar with the term, means financial technology. FinTech itself is a rapidly growing and evolving industry. Many fields and businesses are taking advantage of FinTech. Logistics is becoming a major player in adopting FinTech, and for a variety of reasons. The biggest and most important reasons are the following:
- Improvement in the speed and efficiency of the supply chain
- Finance opportunities for equipment and inventory
- Payment options for drivers
- Billing choices for the business
Let’s dive in.
What Is FinTech?
You’ll need to understand exactly what FinTech is. Once you know this, you can apply it to logistics. So, let’s discuss it in the simplest terms possible.
As mentioned earlier, FinTech stands for financial technology. This technology has been growing and evolving rapidly for several years. Often, FinTech companies are start-ups looking to get in on the ground floor. Ultimately, their goal is to streamline financial processes of all kinds for business.
This comes in a number of formats. For example, many FinTech companies create an app. Additionally, any kind of cloud-based software is usually the foundation of FinTech products and projects. The goal is to digitize and streamline without any need for the customer to have hardware. Essentially, any innovation that leads to more usage in mobile is a win in FinTech. Any business using technology to enhance or automate financial services is using FinTech.
Improving the Supply Chain
I’m going to start with the absolute biggest impact FinTech can have on logistics. Nearly every step in the supply chain can be improved with quality FinTech. From the supplier to the buyer, and from pickup to delivery, there are digital opportunities to be had. In particular, there are the mutual benefits to buyers and suppliers. Let’s take a closer look at both.
FinTech and the Buyer
There are a couple of significant benefits of using FinTech for buyers.
Benefit #1: Extending Accounts Payable
Have you ever wanted to extend accounts payable? FinTech has the ability to act like a financial broker.
For example, a shipper can select a third-party carrier to move its freight. FinTechs usually have relationships with multiple banks and financial institutions. Therefore, they act like a broker for finance. Essentially, the FinTech is financing the transaction between you, the buyer, and the supplier. You get more time to make your payment.
Also, in exchange for using the FinTech, the supplier gives you a discount. For instance, this discount may be your cost of capital. This cost is often lower than generic financing options. Also, an improvement in working cost of capital helps you to fund growth and expansion into new markets and territories.
Read More: The Future of Emerging Payments: Connecting Cash with Digital
Benefit #2: Inventory Orders and Resupply
You’ll find the financing isn’t all that matters. Additionally, you can reorder inventory more quickly. You can avoid having to do manual sporadic reorders. Instead, you use FinTech to set up preselected ordering. You may do this on your schedule. Rather than reach out to each supplier individually, the tech is already set up to digitally handle your needs as they come.
This is a newer evolution in FinTech. You’ll find each new innovation is to further digitize and streamline your business.
FinTech and the Supplier
If you’re the supplier, you’re also gaining three major benefits.
- Faster Payments: You’re able to file for much quicker payments. FinTech is the cheapest method of acquiring faster pay. For a nominal fee, you can use tech to receive payment in as fast as two days. Most buyers prefer anywhere from 30 to 120 days. FinTechs allow you to be paid faster, while buyers can spread out their payables even further.
- More Consistent Orders: Mirroring the buyer benefit, you get faster reorders. You’ll know when your orders are coming. You can plan and schedule accordingly.
- Ease of Joining: You can make yourself much more accessible to buyers. Often, all that’s required is to sign up for an app. By doing so, you’re giving yourself greater visibility to your customer base.
Financing Equipment & Inventory
In logistics, you’ll always need more inventory. You’ll also have a regular need for new equipment. Naturally, the cost and process of procurement can be intimidating.
As FinTechs evolve, they’ll continue to make this process easier for you. For example, FinTechs let you bypass banks entirely. Rather than filling a direct application in a branch, FinTech can run credit checks for you.
The major benefit here is cutting out the need for a person. You’re minimizing the steps between you and productivity. You need to be able to finance new inventory and equipment. Moreover, you also need to do it quickly and with minimal interruption. FinTechs are doing all of this for you. FinTechs operate much like blockchain in this way.
We’ve discussed how suppliers want quicker payments from buyers. Drivers are no different.
FinTechs provide the capability for digital check deposits. As an employer, you can pay your driver directly using FinTech. Conversely, drivers may also use mobile capture to electronically deposit a check using their smartphone. Your drivers will be happier. You’ll also be creating less work on the back end.
Traditionally, billing is an exhaustive manual process. Often you may need one employee to do literally nothing but billing. However, the moved toward digitization is beginning to render this need obsolete. Mobile capture and billing options are a continued evolution of FinTech.
For instance, Tiger Lines out of California was spending countless hours doing manual paperwork. Some of this was as mundane as removing staples and filing papers. Missing or inaccurate paperwork complicated this work even more.
Once Tiger Lines invested in digital processing, they were able to centralize invoicing. Not only did this make less work for their employees, but it gave customers greater visibility. Also, they saved literally tons of paper.
Read More: Are Banks Going to Win on Open Banking?
The benefits here are multifold:
- More time for employees to do other work
- Real-time customer visibility of BOLs and invoicing
- Less manual entry from drivers
- Significantly less paper usage
Improving invoice turnaround time can also help if you’re in a remote area or if you need to speed up your cash flow.
From Here to Beyond
FinTechs are constantly evolving. This evolution has become more rapid by the year. The applications will continue to grow along with them. I’d argue there’s no industry more in need of this than transportation and logistics.
Many companies have been resistant to push toward the future. Trucks, drivers, and the companies employing them often carry an old-school mentality. Yet as the world evolves, logistics isn’t immune to the need for growth.
Furthermore, we’re seeing digitization in logistics reap significant benefits at rapid rates. Once companies embrace FinTech and mobile app solutions, productivity increases.
So much of the trucking industry is about time. This includes timely orders, timely pickup, timely delivery, and timely payment. Delays in any phase can often cause delays across the entire process.
Customers are continuing to evolve and grow digitally by the day as well. It’s the responsibility of those in the logistics industry to take advantage of every opportunity to better serve their customers. FinTech is the fastest-growing revolution to meeting this end.
Soon, FinTech will be adding developments in artificial intelligence and a greater relationship with RegTech. (That means regulatory technology. These are the people who gather evidence on data breaches and money laundering.) This is just to name a couple. Each development will provide a further application to the world of logistics. The world of logistics will need these innovations to endure long into the future.