Navigating high-tides: How fintech will disrupt maritime?
Fintech refers to a new wave of technology that aims to improve and automate the delivery and use of financial services. Its primary goal is to help individuals, businesses, and companies manage their financial operations more efficiently. Initially, fintech was used to describe the technology employed in the backend systems of established financial institutions like banks. However, in the last few years, there has been a shift towards embedded finance, where fintech has become the backbone of various industries. Today, fintech encompasses different sectors, including education, retail, tourism, transportation, and arts, to name a few — but what about maritime?
Like any other service industry, the maritime industry faces the challenges of global competition and the increasing need for efficiency. In addition to concerns about human safety and environmentally-friendly operations, the industry’s service excellence is based on operational and management excellence, which is reflected in the results of service efficiency and made possible by technology applications that improve processes. For reference, the global maritime disbursement industry, which covers expenses related to vessel operation such as fuel, port fees, crew wages, and repairs, was valued at a staggering $200 billion in 2021 alone. With such substantial figures, there’s clear room for fintech to simplify and scale up various segments of the maritime industry and play an increasingly significant role in shaping its future.
Simplifying money flows
Maritime businesses often need help with manual tracking and the possibility of losing physical invoices, leading to inefficiencies in the payment and transaction process. Even with e-invoices, the need for automated digital processes can save time and effort. However, fintech solutions can simplify payment and transaction processing by enabling the digitalization of trade-related paperwork within secure platforms. One solution is seamless connectivity between shipping ERP software and banking platforms, allowing payment files to be easily transferred without manual intervention. Additionally, status updates can be automatically transferred from the banking platform to the ERP software for reconciliation. Adopting fintech solutions for payment and transaction processing includes streamlined processes, reduced costs, and more eco-friendly operations by minimizing paper invoices.
Enhanced trading
The movement of goods in the maritime industry heavily depends on trade finance. Traditionally, this process has been complex and time-consuming, involving several parties, paper documentation, and extensive manual labor. Nonetheless, fintech presents a remarkable opportunity to revolutionize how the maritime industry handles trade finance. By simplifying the process, fintech can make it quicker, more effective, and more available to smaller maritime firms.
One of the most significant obstacles smaller maritime companies face is difficulty accessing trade finance due to their size and lack of financial resources. This problem can lead to these companies needing help to compete with larger companies, which can stunt growth and limit their potential. However, fintech can help address these challenges by providing financing solutions that are more accessible and flexible for smaller companies.
Furthermore, blockchain technology has emerged as a potential game-changer for the maritime industry. Blockchain can transform the way trade finance is handled in the industry by providing a secure, decentralized ledger that can eliminate the need for intermediaries and streamline the trade finance process. This can significantly reduce the time and costs associated with traditional trade finance, making it more accessible for smaller maritime companies. On top of that, blockchain can improve transparency and trust in the trade finance process, which can be critical for smaller companies that may need more reputational capital to secure financing from traditional sources. By leveraging fintech solutions like blockchain, smaller maritime companies can level the playing field and compete more effectively with larger companies. These solutions can help these companies access the financing they need to grow and thrive without being limited by their size or lack of financial resources.
Lower risk in unexplored oceans
By 2028, the global marine insurance market is projected to grow to $40.5 billion. However, insuring maritime businesses comes with various risks, including theft, damage, shortages, non-delivery of goods, piracy, geopolitical instability, and accidents. When determining the total cost of coverage, insurance companies must consider these factors carefully. Fortunately, insurtech solutions can be instrumental in optimizing insurance coverage for maritime businesses. By leveraging predictive analytics and data-driven insights, insurers can enable companies to comprehend their risk profile better, make informed decisions when selecting and managing their insurance coverage, and identify potential risk areas. This can result in appropriate coverage to mitigate those risks and eventually reduce insurance costs.
Who’s going to make it?
→ Reshaping Port, Side by Side: Harbor Lab
Harbor Lab was born out of a real-time need to automate the processing of disbursements (payments to port authorities and other port-related suppliers) while reducing manual intervention and heavy administration. Harbor Lab collects the official port tariffs directly from the port authorities and then inputs those into their internally developed algorithm. Through that, they calculate every port expense accurately and dependably based on a terminal, berth, and several other parameters. The company has raised $6.3m in Seed Funding from VentureFriends, Speedinvest, Motion Ventures, and others.
→ Powering Digital Transformation for Freight Forwarders: Freightify
Freightify’s mission is to democratize technology for freight forwarders. Freightify solves their challenges through their comprehensive SaaS platform giving them and their customers a live pricing platform like the ones used by travelers to compare airfares, showing real-time rates on a single screen. The company’s $12M Series A was led by Sequoia Capital, TMV, Signal Group, and others in early 2023.
A fully digital future
A fully digital maritime value chain will eventually become a reality. End-to-end communications will be streamlined as data and information are shared and standardized through open, interoperable, trusted, and secure platforms. Increased productivity and employee performance will reduce costs and drive earnings. A deeper focus on innovation will help create new products, services, and experiences, generating new revenue streams and increasing customer satisfaction. There is ample evidence of clear use cases that have utilized emerging and commercially viable fintech solutions. These solutions will enable maritime companies to scale to the next level and strengthen their competitive edge in the global landscape. The only question is who will be the first to adopt them and transform the maritime industry once and for all.
The initial thought behind this blog was to empower everyday readers to understand and stay informed about the technology shaping our world. In Discovery Series, my main priority is to demystify complex technology concepts and showcase the creativity and innovation happening in the startup world.
