partnership opportunities between fintech and logistics ... · w i n d e s h e i m m a k e s k n o...

REPORT DECEMBER 2017

PARTNERSHIP OPPORTUNITIES BETWEEN FINTECH AND LOGISTICS SERVICE PROVIDERSL. GELSOMINO & M. STEEMAN WINDESHEIM UNIVERSITY OF APPLIED SCIENCES

W i n d e s h e i m m a k e s k n o w l e d g e w o r k

Partnership opportunities

between Fintech and Logistics

Service Providers

W i n d e s h e i m m a k e s k n o w l e d g e w o r kW i n d e s h e i m m a k e s k n o w l e d g e w o r k

Technology is rapidly changing every aspect of our life, including the way in which business is carried out. In finance, this means Fintech:

advanced, mostly internet-based modern technologies for enabling or providing financial services, such as internet-based technologies in the

e-commerce field, mobile payments or early-stage crowd-based financing of start-ups.

But where is Fintech going? Is it constrained to technological improvements within the financial sector? Or can its innovation potentially

spread and “contaminate” other industries, creating new and exciting products and services? It is with those questions in mind that DINALOG

and Holland Fintech started a project aimed at investigating the role of Fintech within the Logistics industry.

This report is part of that project, and investigates existing and potential form of collaboration between Fintech start-ups and Logistics Service

Providers. It focuses on specific services that could stream from such collaboration and tries to summarise them into a framework, providing a

picture of what the Logistics and Fintech landscape might look like in the near future.

The results are exiting: if collaborations and partnership in the Logistics and Fintech space continue to develop, we will see a development of

product and services that will put Fintech and Logistics Service Provider more in control of the physical, information and financial flows of the

supply chain they manage, for the benefit of all the companies involved.

Abstract

Luca Gelsomino

Senior Researcher

Windesheim University of Applied Sciences

[email protected]

Michiel Steeman

Professor of Supply Chain Finance

Windesheim University of Applied Sciences

mailto:[email protected]


• We specifically thank all the companies that help us in carrying out this project by providing us with a bit of

their time

• We also thank the entire Logistics and Fintech consortium, DINALOG and Holland Fintech for the

opportunity to work on this project and the support shown in its development

• Finally, a special thank for their support goes to our colleagues at Politecnico di Milano (Italy): Federico

Caniato, Antonella Moretto and Agostino Bonzani for their support, as well as at the students that

supported us in this project:

– Carola Gervasio

– Elena Fusari

– Laura Luperto

– Melania Placenza

Acknowledgments


• Logistics and Fintech show promising opportunities for collaboration

• Some fintech are already actively collaborating with LSP, for example in inventory financing or data

management solutions

• If stronger partnerships do happen in the future, LSP and fintech develop new and innovative services in

the direction of holistically manage the physical, information and financial flow in a supply chain

• However, as the most innovative services are based on very recent technological development, their

commercial availability will require significant time

Key messages


1. Logistics and Fintech: two different universes?

2. What innovation (might) look like

3. Mapping innovations in the Logistics-Fintech space

Key messages

Methodological note

References

Table of content


• In this report we focus on a specific type

of Logistics Service Provider, the freight

forwarder, a logistics intermediary

arranging door-to-door transportations

on behalf of customers

• Forwarders overlook a wide range of

logistics operations, from pure transport

and warehousing to supply chain services

• As such, they are in the position to

interact and develop new innovative

product and services with fintech start-

ups

• In the remaining part of this report we

focus on product and services that,

through a partnership between

forwarders and fintech, will ultimately

provide additional value to the supply

chain in which the forwarder operates

Logistics Service Providers

Transportation

Warehousing

Supply Chain Services

• Transportation (air, sea, land, intermodal, …)

• Administration (custom, certification, insurance, …)

• Value added services (track and tracing, reverse logistics, e-

services, …)

• Operations (handling, storage and retrieval, cross-dock, …)

• Services (labelling, packaging, quality control, recycling, …)

• Specialized programs (VMI, bonded warehouse, returns

management, spare parts, …)

• Supply Chain Management (suppliers portfolio, inventory, P2p/O2c, …)

• Sustainability (emission reduction, waste management,

environmental reporting)

• General consulting

Forwarder


• Fintech-logistics interactions

(ranging from simple

exchange of data to full

partnerships) are mapped

on two axes: forwarders

services (cf. previous slide)

and five fintech categories1,

with relevant sub-categories

• We map two types of

interactions:

• Existing, already

commercially operative

• Potential, pilot projects or

simply show of potential

and openness for future

implementations

• Every dot represents an

interaction

Logistics and Fintech: two different universes?

Transportation Warehousing SC Solutions

Payment

Credit Management

Invoice Management

Equipment

Inventory

Receivables

Data monitoring

Data analysis

Data Integration

Data security

Regulatory Reporting

Compliance

Risk Management

Product Liability Insurance

Professional Liability Insurance

Commercial Property Insurance

Transaction based

Finance

Data solutions

Regtech

Insurtech


Logistics and Fintech: two different universes?

Transportation Warehousing SC Solutions

Payment

Credit Management

Invoice Management

Equipment

Inventory

Receivables

Data monitoring

Data analysis

Data Integration

Data security

Regulatory Reporting

Compliance

Risk Management

Product Liability Insurance

Professional Liability Insurance

Commercial Property Insurance

Transaction based

Finance

Data solutions

Regtech

Insurtech

Transaction-based fintech are a potential

source of partnership, especially on invoices:

forwarders could offer additional invoice

services to their customers (esp. SMEs) as an

add-on of their existent offer

Potential overlap in finance is also significant.

Receivable finance is by far the most fertile

terrain, due to the high number of fintechs

active in this field.

Data solution is the most abundant of existing

partnerships, due to the focus on data

management of most fintech. Partnerships

involve everything from visibility over

available empty cargo to integration and real

time visibility over multiple deliveries

Regtech and Insurtech do not present active

or potential partnership yet. Although

(especially for insurtech) there seems to be

potential to develop innovative products in

collaboration with forwarders, openness to

this kind of partnerships seems to be farther

away than other fields


• Based on the general understanding of current and potential collaboration opportunities in logistics and

fintech, we have identified a set of products and services that describe what could (or, in some cases, does)

happen if those two industries work together

• This include products and services that are already implemented, pilot projects we have mapped or, in

some cases, innovation trajectories that, by talking with experts in the field, seem to be on their way

What innovation (might) look like (1/3)

Invoice financingInvoicing financing is normally offered by Fintechs to manufacturers and trading companies. However, an LSP can partner with a Fintech to offer its customers financing of the invoices of the goods delivered by the LSP. The LSP has control over the delivery process and can provide data on proof of delivery to the Fintech. LSPs operating (in) national distribution networks that have access to a large number of SME-customers are attractive to team with Fintechs.

Inventory FinancingAn LSP can offer financing of inventory to its customers when this inventory is stored in the LSP's warehouse. As the goods are in the LSP's warehouse, the LSP has the most reliable data on the inventory levels and mutations and has retention rights on the inventory. The transparency and retention rights reduce the risks of financial institutions financing the LSP. They can claim their rights a the LSP directly without getting involved with other creditors of a shipper in financial trouble.

Early custom clearanceIn cross-border e-commerce transactions, the enormous volume of low value shipments makes it almost impossible for customs and customs brokers to check compliance for each individual shipment without the original invoice and reliable data on the payment of invoice. Fintechs, customs brokers and customs can offer webshops, platforms and their customers advanced customs clearance services making sure that invoices and payments can be check automatically.

Business intelligence servicesLSPs and Fintechs collect a lot of data on customer orders and deliveries and can use this information to support shippers in optimizing their delivery strategies. Especially in the B2C markets, information on the success rate of attended home deliveries, can make consumers at the check out of a webshop aware that an alternative solution (e.g. unattended delivery at a pick-up point) provides more comfort to the customer and generates less costs for both shipper and logistics service provider.



Credit managementIn context such as e-commerce, characterised by a proliferation of small (sometimes micro) enterprises, LSP often oversee the only information available on the actual performance of small actors: delivery performances, volumes, sometimes even invoices. On the other side, the financial world, especially in the last years, is always looking for additional information that can enrich the standard credit rating. A partnership with fintech offering data analytics (e.g. big data) information networks can provide that value added streaming from operative information that can make the different for small and micro enterprises in obtaining a financial rating and possibly, access cash from external financiers.

Information managementIn context such as the e-commerce, characterised by a proliferation of small (sometimes micro) enterprises, LSP often oversee the only information available on the actual performance of small actors: delivery performances, volumes, sometimes even invoices. A partnership with fintech offering data analytics (e.g. big data) and network of information can provide such micro enterprise with a financial rating and the possibility to access cash from external financiers.

Workflow services for SMEsSMEs usually face more difficulties in managing their procure-to-pay (P2p) and order-to-cash (O2c) cycles, especially in cross-boarders transaction: lack of proper resources and training, difficulty in access information, relative higher costs due to economies of scale, and so on. It’s (also) for this reason that several fintech are already providing automated workflow management services to SMEs. However, logistics companies are playing a role too: large LSPs (for example: Simon Hegele in Germany) are already taking over operative procurement tasks from their customers, exploiting the natural synergy with standard inbound logistics operations. Several other LSPs commonly take over the invoicing process of their foreign customers. It is natural to expect convergence between fintechs and LSP in offer more and more comprehensive workflow solutions to their customers.

Insurtech data supportA partnership between a LSP and Fintechs offer higher visibility on operations and availability of data on the conditions of shipments to a shipper. These services support a shipper in avoiding and managing risks in logistics operations, and do not just generate lower insurance claims, but create more reliable supply chains.



Supply Chain Finance houseFull working capital financing is rapidly gaining attention of companies and financiers. In manufacturing supply chains with strong, large buyers (such as automotive), orders can reliably be traced back to several tier of supply. This means that innovative fintech could finance tiers of supply by keeping the ownership of the good flows throughout the supply chain and providing to suppliers the goods and paying them for their value added only. However, they will need to partner up with LSP that can keep a stronghold on the product and information flow, providing traceability, quality check and reliability throughout the tiers of supply.

Real-time asset monitoringAs technology evolves, it becomes easier and easier to monitor geographical location and condition of an asset. This opens up additional opportunities for LSP in the direction – in partnership with a fintech – of an information provider. Reliable and timely information on, for example, temperature and humidity of goods in a container, weight on a pallet at all time, or even more reliable ETA based on constant GPS monitoring provide additional value for both customers as well as financial institutions or other supporting actors in the supply chain.

Fraud detectionAs supply chain grew more complex everyday, holes and gray area that can be exploited to commit asset-based fraud are more and more common, making financiability of assets very risky. New technology (e.g. IoT or blockchain) can provide greater transparency and traceability of assets throughout the supply chain. A product digitized on the blockchain ca be easily traced at any given moment with high reliability, providing corporates and financiers with sensible information on location, status and origin of goods. LSP are in the right position to provide to their customer (through a partnership wiht Fintech) such visibility, to provide more fraud-secured supply chain services.

Material passport and circular economyIn the last years the concept of circular economy has taken the stage. It revolves around the idea of reusing products, reassembly components and recycling materials in order to increase the life cycle of goods. However, circular economy business models can hardly be applied without “material passports”, databases of reliable information describing defined characteristics of materials present in products, including their origin and other traceability information. Large LSP could evolve in the direction of providing material passport services as triggers of circular economy business models


To put those products and services

in context, we can map them on

two axes:

• The level of disruption on the

LSP, which can radically change

its role in the supply chain, or

still be focused on logistics

services

• The readiness of products and

services, which in seek of

simplicity we divided into less

or more than 5 years

Mapping innovation in the Logistics-Fintech space

…ready now or within 5y …ready in more than 5y

…disrupting

the role of

the LSP

…slightly

changing the

role of the

LSP

This

innovation

is…


• Innovations that pivot the

forwarder into information and

financial flow management will be

positioned on the top of the chart

• Among those, the most disruptive

is the LSP-led SCF house, which

however will require technological

developments before being ready

for commercial applications

• Less disruptive innovations see the

forwarders using data more

efficiently (e.g. business intelligence

or support to insurtech)

• Additional technological

developments will lead, through the

years, towards a better control of

physical goods (fraud detection and

real time monitoring)

Mapping innovation in the Logistics-Fintech space

…ready now or within 5y …ready in more than 5y

…disrupting

the role of

the LSP

…slightly

changing the

role of the

LSP

Invoice

Financing

Inventory

finance

LSP-led

SCF house

Insurtech

data support

Early custom

clearance

Enhanced fraud

detection

Information

management

Material

passports

Workflow

services for SMEs

Business

Intelligence

services

Credit management

services

Real-time asset

monitoring

This

innovation

is…

Transportation Warehousing Supply Chain services


• This is one part of a series of two reports, developed as part of the project “Logistics and Fintech”, carried

out by DINALOG and Holland Fintech

• For more information about the project, please visit http://logisticsandfintech.com/research/

• The other report of this series is titled “Fintech opportunities within modern supply chains” and is available

upon request from Luca Gelsomino ([email protected])

• Overall, the development of this series involved a total of 21 interviews, which constitute the primary

source of information used

• Interviewed involved 12 fintech or other technological providers, 4 large buyers, 3 LSPs, 1 financial

institution and 1 consultancy

• Moreover, intermediate results benefitted from a round table held on May 2017, involving approximatively

15 participants (LSPs and fintech)

• Finally, a large body of secondary sources has been analysed to complement and enrich existing results

Methodological note

http://logisticsandfintech.com/research/

mailto:[email protected]


1. The classification of fintech services has been derived based on the following sources:

– https://hollandfintech.com/infographic-dutch-fintech-scene/ (retrieved 12th of December, 2017)

– Gomber, P., Koch, J.-A., & Siering, M. (2017). Digital Finance and FinTech: current research and future research directions. Journal of

Business Economics. http://doi.org/10.1007/s11573-017-0852-x

– Deloitte. (2016). RegTech is the new FinTech: How agile regulatory technology is helping firms better understand and manage their risks

2. Schueffel, P. (2017). Taming the Beast: a Scientific definition of Fintech. Journal of Innovation Management, 4(4), 32–54. Retrieved from

https://journals.fe.up.pt/index.php/IJMAI/article/view/322/221

3. David P., 2013, International Logistics: the Management of International Trade Operations, Baldwin Wallace University, 2015 Chapter 11 and 12

4. Rodrigue J.-P., Comtois C. and Slack B., The Geography of Transportation Systems, 2°Edition, Taylor & Francis: London and New York

5. Notteboom T., The Time Factor in Liner Shipping Services, Maritime Economics & Logistics, Volume 8, Number 1, 1 March 2006, pp. 19-

39(21)

6. The Paypers. (2017). B2B Fintech: Payments, Supply Chain Finance & E-invoicing Guide 2017. Retrieved from

http://www.thepaypers.com/reports/new-b2b-fintech-payments-supply-chain-finance-e-invoicing-guide-2017/r768271

7. Leong, C., Tan, B., Xiao, X., Tan, F. T. C., & Sun, Y. (2017). Nurturing a FinTech ecosystem: The case of a youth microloan startup in China.

International Journal of Information Management, 37(2), 92–97. http://doi.org/10.1016/j.ijinfomgt.2016.11.006

8. International Monetary Fund. (2017). Fintech and Financial Services : Initial Considerations. Retrieved from

https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2017/06/16/Fintech-and-Financial-Services-Initial-Considerations-44985

References

https://hollandfintech.com/infographic-dutch-fintech-scene/

https://journals.fe.up.pt/index.php/IJMAI/article/view/322/221

http://www.thepaypers.com/reports/new-b2b-fintech-payments-supply-chain-finance-e-invoicing-guide-2017/r768271

http://doi.org/10.1016/j.ijinfomgt.2016.11.006


Partnership opportunities between

Fintech and Logistics Service Providers


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