US Bank rolls out ‘cafeteria-style’ payment system for carriers

U.S. Bank, a major payments processor and lender to the trucking industry, has rolled out a new tool that will compete head-on with factoring.

It involves technology, but more significantly it involves the ability of a carrier to choose which specific invoices get paid early and which ones don’t. 

John Hardin, general manager of transportation in the Corporate Payment Systems of US Bank, used the term “accelerate” to describe what a carrier would be able to do with the Cash Manager dashboard. Accelerating payments is nothing new; choosing which specific invoices to do it with is the significant change in the combined program that teams the Cash Manager dashboard with the capabilities it is calling Quick Pay. 

“What we’ve allowed them to do and what we haven’t been able to do previously is selectively choose an invoice and accelerate it for payment,” Hardin said in an interview with FreightWaves. “You’ll be able to look at a specific invoice for a specific shipper and decide, hey, that’s worth accelerating it.”

Hardin said carriers getting paid by their shippers through US Bank previously had the ability to have all payments from a shipper accelerated — or none of them. 

Prior to that, a carrier could be in what Hardin referred to as “full collaboration mode” in which it could “accelerate all the payments across all the shippers.” There also was an option in which a carrier could accelerate payments from some shippers but not all. Those choices remain. 

“And some carriers would say, ‘I will never pay to get paid,’” he added. “And those are the carriers that simply get paid the term.”

Hardin agreed that the new system could be described as “cafeteria-style,” allowing carriers to choose some payments to get accelerated while passing on others. 

Hardin resisted a description of the Cash Manager/Quick Pay system as a form of factoring. “We’re not saying we’re in the factoring business,” he said.

Competing with the factoring companies

But he did say that US Bank’s system will compete with the “vast majority of factoring companies that are buying an entire book of receivables and charging a pretty hefty premium.” Hardin said he believes current factoring rates are in the 2.5% to 3% range.

Hardin gave an example of what might be what he called the “nominal” fee that US Bank would charge on an accelerated invoice. He cited a $1,000 invoice that a carrier might choose to accelerate by 22 days. The fee to be charged is LIBOR based, but he gave a current estimate that the invoice could be accelerated for about $17.

As far as the financial goal that is inherent in the fee, Hardin said US Bank’s goal was to “come in below the factoring price but we needed to come in a bit above our current system.”

Those carriers whose philosophy had been to never “pay to get paid” are a key target of the initiative, Hardin said. “That’s why we try to price this below what the factoring company will charge you.”

The type of considerations that a carrier might take into account when choosing whether to accelerate a certain set of payments can vary widely, Hardin said. In any given month, he said, a carrier will ask itself certain questions, including those surrounding its current financial situation. Are there invoices with shippers that are well past 60 days?

(Hardin added that in the peak of the strong freight market of 2018, carriers were getting paid between 30 and 45 days after invoicing. That has slipped to 60 days now.)

“They might see something out there that they can accelerate for a nominal fee to help them make payroll without getting hooked on a factoring solution,” Hardin said. “We have carriers that are all across the spectrum. Some remain very cash rich, some are cash strapped right now.”

US Bank last year processed about $29 billion in transportation-related payments, with the largest portion of that in trucking. Hardin declined to say what percentage of that activity was in the trucking sector. He did say U.S. Bank and Cass Information Systems are the top two payment companies serving trucking. 

Hardin said the launch last month of Cash Manager/Quick Pay was the culmination of a “multimillion dollar investment” and several years’ worth of work. 

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