Digital Payments Speed the Movement of Cargo

Supply chain disruptions aren’t the only reasons for cargo delay. Another problem is that cargo is sitting in holding for up to three days, awaiting traditional payment methods at a time when it could be released the same day with digital payments.

With imports, the delay is often due to auxiliary charges, such as import service fees or terminal fees at ports that must be paid up front before getting cargo. Traditionally, they’re paid via check or wire transfer — or even with cash or prepaid vouchers, if the cargo is coming in by air.

These slower payment methods are especially problematic for the intermediaries promising to get cargo to their customers’ warehouses on time — if they don’t deliver, they’ll lose the amount they quoted.

“So, it’s archaic, it’s costly, it’s inefficient, it takes a lot of man hours, and you run into penalties, demurrages and things like that,” Juan Carlos Dieppa, chief operating officer and co-founder of PayCargo, told PYMNTS. “It slows the whole process down.”

Check and wire payments cause problems on the export side, too, albeit of the data-related sort. Here, there’s often a challenge in reconciling when it was billed and when it was paid.

Creating the Payment and Recognizing the Payment

Digital payments help solve these problems by moving funds quickly — along with all of the data both parties require.

“We have a saying at PayCargo that ‘data is today’s currency,’ because the data becomes almost more important than the payment itself,” Dieppa said.

If the vendor receives a check and doesn’t know what it’s paying for, or the amount doesn’t reconcile with what must be paid, it causes a delay.

However, with a digital payments platform, the customer goes into the system, picks the vendor, enters in the lading number, enters what needs to be paid and hits a button. The vendor is immediately told that they’ve been paid for that bill of lading.

“The whole process of creating the payment and then the whole process of recognizing the payment — we boil it down to a one-hour process,” Dieppa said.

See also: Shippers and Carriers Lose The Paper In Favor of Embedded Payments, Automated Docs

Delivering Benefits to Vendors and Their Customers

PayCargo is a two-sided network. On one side are the vendors or merchants, which include ocean carriers, airlines, air-ground handlers, trucking companies, railroads, warehouses, container freight stations and port terminals — “everybody that’s provided some kind of service and needs to get paid,” Dieppa said.

On the other side are importers, freight-forwarding companies, third-party logistics firms and others. As Dieppa put it, “Everybody who has moved cargo with one of those other companies that move the cargo for them.”

Vendors like the efficiencies of getting paid and receiving the data quickly. Payers also realize the efficiency of being able to pay all their vendors in one place, rather than going to different websites to pay each vendor.

Changing Internal Processes

Despite the advantages, digital payments account for only about 20% of the North American import market and roughly 5% of the export market, Dieppa said. The remainder are still paying with checks, wire transfers and other traditional methods.

The primary hurdle for companies is changing internal processes. For example, while headquarters may decide to make a change, it takes time for the different branch offices to follow suit. In addition, each of the vendors those branch offices deal with must be able to change, too.

Once they’ve made the move, though, both parties end up reaping the benefits.

“That digitalization continues to grow through an exchange of data between all of the parties,” Dieppa said. “At the point we’re integrated with the payers and we’re integrated with the carriers, it’s all digital — the correct invoice, the correct amounts, the reconciliation of all that data — and very little manual input.”

Read more: Planning for Long Haul, Trucking Companies Embrace Driver-Friendly Payments