Vertical focus – Transportation sector bursts with SCF opportunities
- It’s a big sector
- Logistic services are mainly bought by investment grade buyers (P&G, Walmart, Best Buy, etc.) dealing with small companies – truckers, movers, warehouse companies, etc. This is attractive buyer risk to the investor market.
- Because it is messy, there are opportunities for data, algorithms and underwriting models. For example, when it comes to reconcilement, invoices, etc. a logistic invoice is 7x more likely to OVERBILL than UNDERBILL. With the right data and analytics, these invoices can be analyzed for risk of collection.
- Banks don’t like to touch the sector. Why? Logistics has one of the highest percentages of invoices that are never paid. Banks like dealing with clean, high quality invoices.
U.S Bank – Their Powertrack platform, founded in 1997, was merged with Visa’s commercial payment and network management to form Syncada. As reported here last year, Visa divested of this joint venture and now the platform is back in U.S. Banks commercial card business. The solution is a cloud-based, collaborative solution buyers can use to accelerate payment to suppliers and gain efficiencies by automating the accounts payable process. They have processed over $20 billion in transactions annually.
Trax – you can think of Trax as a combination of Dun & Bradstreet, Visa and a freight audit company in one that targets specific logistics invoices. Trax describes themselves as the only company that fixes bad logistics data by taking the garbage in and putting safe information out to take the pain and risk out of settlement
Other sample providers in the freight payment services market include CASS, CT Logistics, nVision Global Technology Solutions, CTSI, TTC/Technical Traffic Consultants Corp., Tranzact Systems, and Data2Logistics.
Given the size of the market, it is interesting to see how these firms progress with early payment solutions to help their customers.