Amid the great digital shift, and in the post-pandemic world, the transportation industry is undergoing significant changes.
With those changes come new vulnerabilities that need to be addressed as the trucking industry, dominated by small fleets and operators, embraces digitization but remains vulnerable to bad actors.
Corcentric SVP of Product Management Sudarshan Ranganath; Uber Freight’s Head of Strategy and Planning Jerry Tolochko; and SmartHop CEO Guillermo Garcia told PYMNTS that fraudsters have been seeking new avenues to exploit. But modernizing back-office functions and payments processes, while setting up controls — and adopting real-time payments — will pay dividends in combatting fraud and improving cash flow, too.
The industry itself has been heavily reliant on manual processes and paper and even phone calls, which for years were the preferred conduits by which fleets booked loads, and sent and received payments.
But with the movement toward distributed and remote workforces, relying on those methods for proof of delivery can be risky, as they can easily be mishandled, Garcia noted.
“Unfortunately, you see a lot of PDFs, and this is very manual,” he said, “and emails go, emails come, PDFs get to the wrong hands.”
To combat this issue, platforms such as Uber Freight are automating the load booking and payment process, but only a handful of brokers have the technology to do so.
Ranganath observed to the panel that supply chain disruptions had forced companies to find new vendors — and fast tracking the process led to bad actors coming into the mix.
In the meantime, the push toward remote work and the “great resignation” brought new staffers onboard at trucking firms, many of whom had been less-than-fully acquainted with best practices in vetting partners.
The Fraud Vectors
The trends have given rise to a perfect storm. Garcia stated, “In this massive industry, there’s always someone who is trying to sell something to small trucking companies.” The smaller operators, struggling in an inflationary environment, are eager to find new solutions (in technology or financing) and partners in the ever-urgent bid to improve margins and cash flow.
These operators, are making decisions based on emotion rather than logic. Garcia said many smaller trucking outfits “are starting to think, ‘Well, two years ago my bank account was looking very different from what it is right now … and so you test new things. That’s a great avenue to get into systems that are scams and to choose vendors that — in a good moment — you wouldn’t tend to have.”
In this landscape, it’s not prudent to simply opt to go with the highest bidder for one’s freight services — because the money may never arrive. The rise of double brokering, a fraudulent practice where someone impersonates a carrier to move a load and then stiff the actual carrier, has made the stakes higher than ever.
Garcia emphasized the importance of doing due diligence on vendors, not just on the payment side but also on who you’re doing business with, such as brokers and shippers. He warned against making decisions based on emotion rather than rationality and advises against going for the highest bidder.
Garcia said, “It’s crucial that you don’t just go for the highest bidder, as that bidder could get you into more trouble than sticking with who you know and have a relationship with.”
Against that backdrop, it’s more important than ever to find the right partners, and to implement controls at the onboarding, invoice processing and payments levels.
Marketplaces, especially, Tolochko said, need to be vigilant about onboarding, stating, “The solution fundamentally comes down to how you evaluate the carriers that come onto your marketplace,” adding, “You need to be careful about where you are sourcing loads from to ensure that it’s not someone impersonating a different respected brokerage.”
Eyeing Payments — and Payments Processes
In addition to being careful about business partners, it’s important to be cautious about payment instruments, the panelists told PYMNTS. Historically, advances in the freight industry were provided via specialized payment instruments like Comcheck, T-Check, or EFS check. However, these instruments have the risk of advancing someone money who isn’t actually the carrier in question, which ties into internal fraud.
According to Tolochko, digital payment instruments dramatically decrease the risk of fraud. Payment controls also can help keep fuel costs transparent and under control.
He noted that fuel can cost trucking companies hundreds of thousands of dollars annually, and unscrupulous drivers can wield fleet cards with abandon. In addition, pumps at truck stops can be vulnerable to skimming fraud.
As Garcia observed, “Controls, and especially internal controls, prevent fraud from someone with your company, but also from people [as the trucks] are going across the country.” A driver who stops to get a radiator repaired shouldn’t have to worry if the mechanic in the middle of, say, Arkansas, has a secure point of sale or not.
While larger companies tend to be better at implementing technology for fraud prevention, smaller companies are more vulnerable due to a lack of technology sophistication. Ranganath suggested implementing a 12-step validation process when onboarding business partners to ensure that everyone is held to the same high standards. Automatic validation can also help manage the process without holding it up, ensuring that payments are processed quickly and accurately.
Ranganath illustrated the multiple levels of validation with Corcentric’s onboarding processes — website validation and phone calls work in tandem to authenticate businesses.
The same practices apply when companies seek to change their bank or account information. Invoices can be subject to transaction controls, and automating back-end functions can seek out and uncover anomalous behavior.
“As you process payments, you can look for a number of things that might just call for additional scrutiny,” he said, adding, “You can have technology look at these patterns and identify that before you actually process a payment, it’s ‘good.’”
Uber’s Tolochko said that controls can be instituted at the platform level to make sure that troublesome behaviors are identified, and addressed, across the entire marketplace.
Faster Payments
With the acceleration of payments themselves, fraud can also accelerate, making it even more important for organizations to have strong transaction controls and use technology to identify patterns in near real time.
“The strong belief is that for faster payments and to change the fundamentals of payments, it all relies on risk. Payments are a commodity. It’s how you assess the risk, how you mitigate the risk that will allow you to do things fundamentally different,” said Garcia, who went on to note, “Payments cannot be isolated from other components of your business.”
Tolochko said real-time payments present a “phenomenal opportunity for platforms that are able to manage the risk to deliver more value to their users, to their customers, since speed matters.” He also said moving toward real-time payments can create a more competitive product and improve efficiency.
“Real-time payments increasingly will become a norm and an expectation of customers and users,” he said.
As Ranganath summed up, with the issues facing transportation in general and truckers in particular, “This is a set of challenges that are not going away anywhere. … You have to deal with it and have to deal with it head on. The fact is: Technology can help.”
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