Case Study: How a Shipping Company Reduced Payment Risk

Global trade hit a record high of $28.5 trillion in 2021, achieving $7.7 trillion in the first quarter of 2022. Although trading internationally brings unique opportunities for growth and expansion abroad, entrepreneurs must consider export strategies, supply chain risks, legal issues and transport roadblocks. With enhanced market volatility and global uncertainty, its essential companies review their payment strategy.

In this case study, we detail how partnering with a specialist payment provider helped a shipping company reduce its payment risk, improving cash flow and overall schedule reliability.

Client Profile

Our client, a global shipping company, regularly sailed from Europe to Asia carrying containers and bulk cargo. The company operated sailing routes from Norway, Belgium, the Netherlands, the UK, and Portugal to Cape Town before reaching India. Its voyages were complex, lasting anywhere from 25 to 75 days. Its ship and crew regularly encountered a network of agencies with differing documentation requirements and fees. There was a tight error margin of two days at each port. As a result, port fees and crew wages presented a significant payment risk, impacting its profitability.

Client Challenge

Payment delays often result in shipping hold-ups, affecting the entire supply chain, including sales and manufacturing. The longer the client’s cargo stayed in transit, the higher the risk of damage or pilfering, impacting the company’s cash flow.

To complicate matters, customs authorities and international agencies often lack a detailed contract. A ship’s captain and crew may not fully understand the terms of these contracts. PayAlly’s Legal Counsel observes, “There is no office or legal advisor to support the voyage. It’s the simplest form of communication.” Some vessels can be arrested due to payment delays. Every country will have one or two admiralty courts, where orders will be issued electronically to the applicants. The port’s Harbour Master will execute the order by serving the notice to the Captain. The Harbour Master has the power to lock the cockpit and take the keys.

• Port fees: PayAlly’s Legal Counsel notes, “Port fees are important. These fees allow a ship to access water and electricity. If you delay for one day, they will also add penalties.” He explains, “If you don’t pay port fees, they can take action. They can seize your goods. If feasible, the Harbour Master can go for auction to recover the port dues.”
• Wages: PayAlly’s Legal Counsel recalls, “Our client called their PayAlly Relationship Manager to escalate the case to me. What happened was that at the port in India, the crew did not receive their wages on time due to time differences between continents.” This caused a significant delay to the shipping company’s schedule and was a huge stressor.

How PayAlly Helped

PayAlly’s Relationship Managers were on hand to support, double-checking payments to ensure wages and port fees were paid on time. Our team of experts assisted in spotting issues that may have been missed by the client due to complex multi-currency movements, time differences or public holidays. Knowing that payments are double-checked by humans gave the shipping company extra peace of mind, ensuring the voyage went smoothly.

When the company experienced issues, they contacted their PayAlly Relationship Manager, who helped gather documents. The client was able to avoid costly delays and additional port fees. Our client messaging apps delivered a responsive, superior service, offering secure communication channels for urgent requests. The client also sent messages through PayAlly’s payment tool.

Metrics

While the average reliability of container shipping lines has historically hovered around the 66% mark (the equivalent of two in three boats), the client’s reliability had fallen significantly below this in 2021, with one out of three boats arriving on time in India. PayAlly helped the shipping company identify and eliminate potential payment delays with respect to port fees and crew wages. As a result, it was able to meet previous historical targets and improve cash flow.

Client Benefits

By partnering with PayAlly, the client prevented delays in the entry and exit of transient ports. We helped the shipping company eliminate port fines, and wages were paid on time, which is an important requirement to be allowed to dock. Our teams assisted with import/export declarations, fee payments, and other documentation, reducing the client’s payment risk throughout the journey. Finally, we ensured insurance payments were made on time, so its voyages were fully covered from start to finish.

PayAlly offers a specialist payment service that fills the gap between banks and financial service firms. We offer flexibility with the right tools for greater convenience. Apply for a corporate or individual account today.

If you’re already a client, contact your Relationship Manager at any time or call +44 330 777 2220 for more information.