The sea, skies, and highways the world over are filled with scores of ships, trucks, and aeroplanes transporting goods from one country to another. Freight is a round-the-clock operation that ticks over 365 days a year ensuring that supermarket shelves are full and that packages are delivered on time.
The market itself is in constant growth, with a recent report claiming that the global freight logistics market size sat at an astonishing US$7.98 trillion in 2022, a figure that’s expected to more than double to around US$18.23 trillion by 2030. It’s also a market that’s typically very traditional. It’s not unusual for freight firms to still be relying on legacy systems, paper invoices and other old-fashioned processes.
To say that freight is ripe for digital transformation, then, would be an understatement and, as we’ve seen in recent years, there’s no shortage of digital-first challenger businesses taking advantage by disrupting the freight sector with their innovative services and solutions.
In this blog post, we’re going to explore how these disruptive start-ups are changing the freight industry for the better by challenging the status quo, focusing on driving efficiency, and introducing transparency across five key areas, beginning with supply chain management.
1. Supply Chain Management
Fintech start-ups are using sophisticated algorithms, big-data analytics, and artificial intelligence to improve supply chain management for freight operators. They’re doing this, for example, by optimising route planning, load matching and inventory management, which leads to reduced fuel consumption, improved delivery times and increased overall productivity.
Automation and digital technologies are also being used by fintech companies to streamline the supply chain financing process for freight operators, decreasing the associated time and cost. This allows organisations to focus on their core operations while improving overall efficiency.
2. Lowering Financial Barriers
In recent years, there has been a withdrawal of traditional bank lending in freight, which left a funding gap waiting to be filled—and it has been filled by innovative fintechs.
In recent years, fintech start-ups have introduced innovative financing models for freight operators, including peer-to-peer lending and crowdfunding platforms. These provide freight operators with alternative sources of credit and capital, especially small and medium-sized operators who might not be able to access finance through more traditional means.
This not only promotes financial inclusivity and levels the playing field but also stimulates growth and enables more competition by facilitating activities such as the building and maintenance of vessels.
3. Seamless Freight Payments
Fintech doesn’t just mean providing access to financing. Fintech start-ups are also transforming freight payments, primarily by offering seamless and secure digital platforms through which to transact, supported by favourable freight payment terms. This eliminates the reliance on traditional (and slow) paper-based processes to unlock faster, transparent and more secure transactions.
Let’s look at a scenario: A shipment is delivered on time without any problems, but the carrier is only able to send their invoice through the post, leading to a longer invoicing process for the customer. On the invoice due date, the shipper tells the logistics provider that although the correct bill of lading was sent, the invoice is missing a shipment number that needs to be included. Once the shipment number is located, the provider is given a new payment date of 30 more days despite paying the carrier already.
This is something that happens several times per day with logistics providers and is a serious pain point that makes it difficult for organisations to manage their cash flow. But by implementing the right level of automation, fintech solutions can fix it very easily.
4. Leveraging the Blockchain
Blockchain is being explored extensively in the freight industry for its potential to greatly enhance transparency, security and traceability. The blockchain enables decentralised and immutable record-keeping which, alongside other digital solutions, can streamline processes such as documentation, contracts and payments, and tackle challenges such as fraud and payment disputes.
Examples of blockchain innovation in freight include JD Logistics, a company that uses its blockchain platform to create a data exchange ecosystem where data is owned by the user. This platform connects data owners with data users and enables companies to reduce manual processes while enhancing transparency. This results in less time spent on searching for new suppliers, managing inventory and resolving disputes.
5. Freight Digital Marketplaces
Just as marketplaces like Amazon and eBay transformed the way consumers buy and sell goods, freight marketplaces like FreightCore hope to offer shippers new ways to access freight services by connecting shippers and carriers to facilitate the efficient matching of vessel capacity with demand.
In doing so, these platforms enable transparent pricing, automate freight booking processes and provide streamlined communication channels for buying and selling freight services—something which didn’t exist before.
Transforming Freight
The global freight market is a highly complex entity that is inherently difficult to manage and prone to significant challenges. Disruptor start-ups are here to change that by eradicating outdated legacy processes and attitudes with a digital-first approach. Today, there’s no shortage of examples of how these start-ups have transformed the sector for the better, and this is likely to continue well into the future.
If you’re interested in learning more about how fintech is leading the charge in transforming freight, check out our eBook 4 Unique Traits of Trade Credit in Freight & Logistics, and find out how our own B2B trade credit solution is helping freight services unlock their full potential.
