TriumphPay and HubTran Want to Transform Transportation Factoring Payments
The payment portion of a factoring transaction in the transportation industry has been changing for years. TriumphPay acquired HubTran earlier this year to not only address these shifts but to accelerate automation and visibility for factors, brokers and carriers in one seamless payment experience.
BY PHIL NEUFFER, MANAGING EDITOR, COMMERCIAL FACTOR
In the last decade, the transportation factoring industry has experienced continued rate compression, which has created a need to generate efficiencies wherever possible in the funding process.
At the same time rates have been falling, a continued and growing reliance on digital documentation has shifted what was once a paper-reliant industry into one that requires more sophisticated technology solutions. Traditionally, transportation factors made purchasing decisions from the original paperwork of the invoices. While this process has improved slightly with the ability to email invoices, there remains a long and laborious string of actions between carriers, factors and brokers to verify the accuracy of an invoice so it can be paid. In a rate-compressed environment that squeezes factors’ margins, such processes are a detriment to remaining competitive. However, a recent shift in the payment technology landscape could solve the problem, especially as factors continue to conduct business digitally rather than manually.
Earlier this year, TriumphPay acquired HubTran for $97 million, with the acquisition officially closing on June 1. TriumphPay, a division of TBK Bank, SSB, is a carrier payment platform that connects brokers, shippers and factors and aims to increase automation, mitigate fraud and create efficiency by helping brokers pay carriers faster. HubTran, meanwhile, is a cloud-based provider of automation software.
By adding HubTran’s capabilities, TriumhPay is aiming to create a seamless payment experience for factors, brokers, shippers and carriers by automating the highly manual and repetitive invoice purchase, approval and payment process, with TriumphPay bringing in its established integration with many brokers in the transportation industry, while HubTran brings in its many factor clients.
“The broker is our customer and we are facilitating their payment program on their behalf,” Melissa Forman, senior vice president and chief strategy officer of TriumphPay, said. “With this acquisition, we're able to transform that because we’ll now have connectivity on the factoring side, allowing us to push the data to them in a way that can help them develop automation on their side as well.”
Quick Genesis
Some acquisitions are the result of years and years of work and others come together in a matter of months. The combination of TriumphPay and HubTran was of the latter category. While working on a joint integration with HubTran in 2019, the team at TriumphPay became intimately familiar with the firm, its approach and its technological capabilities, sparking an interest in a partnership. Even though TriumphPay was not actively shopping for acquisitions, the idea picked up steam.
“We realized that if we combine these two solutions, it will allow us to create an end-to-end fully integrated payments network — something that has never been done for the transportation industry,” Forman says, noting the two companies’ technology suites are a great fit.
On the other side of the equation, HubTran was also not in the market for a merger or to be acquired, as it was experiencing rapid growth and confident in its own ability to maintain momentum, according to Forman. However, when the possibility of a combining with TriumphPay came up, neither side provided much pushback, with only three months separating the initial conversation and the final negotiation. From there, a month-long legal process ensued and the acquisition was announced on the very same day the two companies signed a definitive agreement. Then, roughly two months to the day of the announcement, the transaction closed, allowing the two companies to officially combine and begin their shared mission of improving the payment experience for transportation factors.
Open Loop Payments Network
Before the merger, TriumphPay and HubTran focused on separate functions of the same types of transactions. For TriumphPay, whose clients are primarily the brokers in a factoring relationship, the focus is on the post-load portion of a transaction, specifically presentment and payment. However, there is a third piece that was not part of its capabilities: settlement. That’s where HubTran comes in.
“HubTran's technology suite is laser-focused on supporting the settlement function,” Forman says. “For a broker, this is done through document processing and workflow management. On the factoring side, it's with their verification modules, document processing and workflow management tools that have been designed specifically for the factoring industry.”
With their powers combined, TriumphPay and HubTran can now offer their clients what Forman calls “an open loop payments network,” with all participants in a transaction — including brokers, factors and carriers — on the same page with the same network of valuable and structured data.
“With this acquisition, we will deliver a network that will provide tools and services to create frictionless presentment, settlement and payment of invoices in transportation,” Forman says. “It brings the data factors need to make purchase decisions while reducing the manual interactions required by the two parties that is required in today’s environment. Combining our two organizations provides factors with a stronger, more connected, relationship with their debtors. Creating that connection provides both parties with efficiency gain opportunities that will allow them to compete in an ever-growing marketplace and allow factors to focus their efforts on business development and creating an excellent client experience.”
“We know that 50% of brokered freight payments are facilitated through a factoring company. Carriers rely heavily on factoring companies to support their back office, their credit departments, their collections departments, etc.,” Forman says. “Being able to connect those two directly through the integration provides real value, not only to those participants but to the carrier as well.”
In addition, through the combined system, TriumphPay can better aid its broker clients by improving their working relationships with factors and carriers.
The Source of Truth
Although many potential benefits of the combined TriumphPay and HubTran solution will be shared across all participants in a transaction, there are some specific benefits for factors. For example, by enabling a bit more efficiency and automation, the network will allow factors to spend more time on business development and their client experience while improving their purchasing decisions.
“Factoring is a tough market. It's high-volume processing where you're purchasing numerous invoices in a day, and repetitive processes have to take place,” Forman says. “[Our network] will allow factors to focus their efforts on their business development and creating an excellent client experience versus spending all of their development resources and time focused on how to make the transaction more efficient.”
According to Forman, the TriumphPay/HubTran network also can help with purchase decisions for factors, providing data directly and eliminating the need for multiple phone calls and emails to confirm the details of an invoice or to confirm if an invoice has been approved. When roadblocks arise, access to real-time data provides transparency to issues as they happen so they can be resolved proactively rather than in the collection process. Lastly, at the end of the transaction, during the cash application process, payments can be posted to invoices and closed out automatically as soon as payments are made rather than via manual reconciliation.
“The TriumphPay payments network enables automation. We are the integration that provides the data which allows for organizations to create automation in their invoice processing,” Forman says, noting that credit risk may also be moved to the network itself. “Factors will have more visibility. We will empower automation and reduce transaction risk because factors will have access to the broker’s data from where the transaction originates, the source of truth.”
Although the acquisition of HubTran has closed, that doesn’t mean the integration process is over. During the next few months, TriumphPay will be focusing on incorporating the HubTran team and combining the technologies of each organization into alignment as a single entity. From there, the two companies will work together to deliver the first integrated payments network — a revolutionary feat that will transform the payments process for the transportation industry.