This fireside chat recap is from FreightWaves’ Supply Chain Meets FinTech event on Wednesday.
FIREPLACE CHAT TOPIC: How leading freight companies are using digital ledger technology to process end-to-end payments.
DETAILS: Digital ledger technology is among the innovations driving the fintech revolution. DLT uses independent computers (nodes) to record, share and synchronize transactions. In the freight business, DLT can be used to speed up payment processing by creating more transparency in the process and reducing or even eliminating disputes.
SPEAKERS: Marc Brousseau, Product Marketing Consultant, Transcard, and Paulo Fernandez, Corporate Partnerships, Global Trade, Mastercard Worldwide
ORGANIC BRUSH: Brousseau is a thought leader in accounts payable, receivables, payments and document automation. A popular speaker at industry conferences and on webinars and podcasts, Brousseau uses his 27 years in the space to advise end users and solution and service providers on how to use automation to improve document and payment-driven business processes. Brousseau has chaired numerous educational conferences and served on several industry committees and boards.
FERNANDEZ BIO: Fernandez has over 20 years of international experience in the payments industry. He is currently responsible for developing partnerships and strategies to capture new payment streams in the freight vertical, focusing on port ecosystems and digital freight exchanges. He has held multiple regional and global roles at Mastercard leading the development of payments and data solutions for corporate, banking and government clients ranging from financial inclusion and B2B e-commerce to supply chain management, travel, ACH rapid payments and support of SMEs.
Watch: How digital ledger technology is changing freight payments
KEY QUOTATIONS FROM BRUSSO
“In short, the way people process their payments and manage their cargo is inadequate. the trucking industry is plagued by invoice disputes and lack of visibility and cash flow issues, all of which combine to create major challenges for shippers, brokers and carriers alike. So we have an environment today where … approaches to automation just don’t go far enough.”
“Up to 70% of all invoices end in dispute. And a lot of these disputes are about seemingly minor issues, right – some extra charges that were unexpected. And what happens is, in most cases, that triggers a phone call, or in most cases, an email between the carrier and the shipper. And we get into this endless back and forth, trying to get to the bottom of things. And the reason we have this problem is because shippers and carriers are sitting on mountains of data, but they can’t use it. So it really speaks to this fragmented way that we’ve gone about automating cargo handling. We believe the solution is to use distributed ledger technology to bring shippers, carriers and brokers together. This is evaluated digitally, end-to-end.”
“It’s obviously tempting when you’re heading into a recession to think that this is the time to buckle down, that this is not the time to automate. But in many ways, this is precisely the time to rethink the way we do things and the underlying cost structure. The way most freight companies, whether freight forwarders, brokers or carriers, have approached automation is this mix of point solutions and closed networks that will never get us to the end-to-end digital environment that [is needed]. What organizations need to do is rethink automation. And we believe that the right foundation for this is offered by digital accounting technology. And if you can use that type of technology, now you can have that enforcement. You can have that visibility as events happen in the field. You can make your money work smarter for you with built-in financing and payments. We think this will be critical. Businesses will be looking for ways to do more with less, and we think digital ledger technology is a great lever to achieve just that.”
KEY QUOTES FROM FERNANDEZ
“One of the use cases we work with is a large corporate freight forwarder that was about to lose one of its key carriers primarily due to high [number of] disputes. The carrier was saying, “Look, in these times, they have to pay me faster. I need to reduce the invoice dispute amounts I talked about. I can’t wait 30 to 40 days for payment because of this financial crisis, whether it’s driver pay increases, gasoline increases, etc. I need to get better control, which is actually the key word here – how I’m an operator gets better control of my system. … Number one is the transparency of the process and that means at any time of the day I can see exactly what the status or status of the invoice is.”
“Distributed Ledger Technology [Mastercard uses] is from a company called DLT Labs from Canada. And what they’re doing is basically… collecting the data from IoT devices from the trucks that are driving in front of them [the platform] and basically getting that into the smart data contract. Therefore, what you have is a real-time invoice. What Mastercard does is we not only bring the partnerships together, but then we enable that payment and we do what we do best and that’s basically credit on one side, debit on the other side. But we’re taking it one step further. What we’re doing today is we’re taking that invoice and essentially bringing it through what we call a supply chain finance marketplace. We then bring in multiple financiers who will be able to actually provide funding for that particular situation.
“Friday is the day that [sees the most] disputes. It’s almost like giving you your Fridays back. Why? Because disputes come with high transparency, especially for the carrier. What is most important is the high transparency of accounts payable and therefore … to improve the relationship with my customers. So instead of calling on Friday and saying, ‘Where’s my payment?’ How about calling and saying, ‘Let’s play golf or something because we’re free on Friday’?”