At the 6th afb Market and Innovation Event, a number of experts will shed light on the topic of customer onboarding from different perspectives. One proven factoring expert is Dennis Wallenda, Managing Director of JITpay Financial GmbH. This company digitizes billing processes in logistics: central billing is combined with a proprietary supply chain finance product that enables immediate payment of service providers.
In his session at the Speed Innovation Market, Dennis Wallenda reports on how the start of business relationships can be technically accelerated and describes the reorganization of processes between a client and many subcontractors via a digital platform. He provides an initial insight into successful factoring in the logistics sector in the following interview.
Dennis Wallenda, Managing Director of JITpay Financial GmbH
Interview and speaker at the 6th afb Market and Innovation Event: Dennis Wallenda, Managing Director of JITpay Financial GmbH
How can a company become a JITpay factoring customer in three minutes? Do you not need any documents or verification or legitimation of the applicant?
Basically, we have to meet the same requirements as other factoring companies. The special feature is our business model: we always acquire the debtor first. We also operate exclusively in the logistics sector. Here we are talking to a freight forwarder for whom many small hauliers work. If they decide to work with JITpay, this forwarding company then invites these subcontractors to register on our platform. At the same time, JITpay receives data from the haulage company about its hauliers, which is of high quality because the business relationships have generally existed for a very long time.
We therefore already have information that enables us to carry out preliminary checks. That's why, in the online application process that a subcontractor goes through, we concentrate on comparing the details with the information that we have received from the freight forwarder or from credit agencies, as well as checking in accordance with the Money Laundering Act.
This is relatively easy for us because our customers are generally smaller companies: mostly owner-managed companies or small businesses. The necessary checks, such as identifying the beneficial owner, are less complex.
The legitimacy check takes up most of the time, i.e. identifying the person who is actually working. Here we work together with partners who provide us with various procedures for checking legitimacy. As a result, it sometimes only takes a few minutes for a haulier to go through our onboarding process in compliance with all regulatory requirements and enter into a contractual business relationship with JITpay.
What makes your company different from other factoring providers?
We have not reinvented factoring. For us - and this may sound a little strange - factoring is actually just an add-on, an additional service. JITpay's main product is the central invoicing of freight services between the client and the contractor.
As we create transparency with our main product and handle the invoicing of freight services for both parties, we have a very high level of certainty that the receivable is actually recoverable. This is because we have the certainty that the service has actually been provided thanks to the large amount of data available in real time and from both parties. And we also know how the service has been provided. This allows us to bill according to the rates and contracts agreed between the parties. The invoice or, in our case, the credit note that is generated in central billing is virtually free of objections. Any differences would have been clarified in advance. This is because we compare the data we receive, including geodata from the haulage company's cab, with the information provided by the client.
As a result, only receivables that we have established beyond doubt flow into our factoring module. In contrast to other factoring providers, we therefore have other options for managing the risk. In principle, we pay 100 percent of the receivables amount to the haulier. This certainly sets us apart from other factoring companies for this clientele.
Logistics is seen by outsiders as an "analog" industry, where you can still touch practically everything and freight documents are physically available. How positively or negatively do market participants view the digitalization of processes?
We have had very different and surprising experiences in this regard. Basically, all market players are always interested in new ideas. The logistics sector is currently being virtually overrun with a wealth of innovations on various topics. But I don't know of any provider other than us that is focusing on the digitalization and optimization of billing processes.
When we launched in 2016, we expected JITpay to be a product for smaller SMEs. We have now realized that we are also attracting a lot of interest from larger freight forwarders. We hit a nerve because the current billing processes are currently very complex, analog and downright cumbersome. With our offer of digitalization and simplification, we are knocking down open doors at management level. When it comes to operational implementation, there is natural resistance because we are changing long-established processes. We are intervening deeply in the order and invoicing management of a freight forwarder.
Overall, the industry is undergoing a digital transformation. Larger forwarding companies therefore often already have their own units for digitalization projects, which often makes access easier for us. We believe we are well positioned to play our part in the necessary changes.
What arguments do you use to best convince new customers?
It varies, because our combined offer includes three individual products. We digitize the order process, we take care of invoicing, including the clarification of any differences and the creation of receipts, and finally we offer factoring for the pre-financing of invoices. Our service therefore has many benefits, which are evaluated very differently by the target customers. For some freight forwarders, the digitalization and outsourcing of processes is an important argument for being able to deploy their resources differently. For other freight forwarders, supplier loyalty is important: with JITpay, they can offer automatic invoicing and immediate payment.
We convince hauliers with the automation of processes through our app and, of course, with the receipt of payment after 48 hours instead of 45 days.
What efforts are you making to further develop your digital solutions?
We have developed a lot in the last year in particular. Three quarters of our staff are software developers. One team in Berlin is solely responsible for our telematics application. We have a lot of ideas about what further expansion stages there could be for our current product. So we put a lot of effort into it and see ourselves as a tech company in this respect.
A question of understanding: Which end devices can the JITpay product be used on?
The haulier has an app on his smartphone which he uses to report his location data, current order data and much more to JITpay. At the unloading point, they can start a dialog to document the delivery, including photos and all proof of delivery. The central billing solution in JITpay then provides the customer with the billing documents and transmits the necessary data to the factoring system. This takes over the purchase and management of the receivable.
What lessons have you learned from setting up and launching your services?
I can recommend constantly questioning yourself at the beginning and not shying away from completely "throwing away" several months of development work because the underlying idea is very good but not effective. It is important to understand exactly what the market really wants. We had a steep learning curve at the beginning.
It is important to try things out on the market as quickly as possible. We were able to convince a freight forwarder here in Braunschweig to test our solution and some of the functions in particular. This feedback is an important input.
It is also crucial to bring together the necessary expertise: JITpay operates as a tech company in the logistics sector and, as a factoring provider, is also a financial services provider for which the German Federal Financial Supervisory Authority is responsible. The knowledge required for this does not exist in one person. A team needs to be put together, which is not usually possible overnight.
After all, there is a risk of getting lost. If you respond to every customer request, the product becomes increasingly complex. However, it is our ambition and aspiration to create a standard. This is crucial for our product and for our success.
Thank you very much for the interview. I look forward to your session at the Speed Innovation Market at the 6th afb Market and Innovation Event on May 28, 2019 in Munich.
The interview took place in the run-up to the 6th afb Market and Innovation Event. Are you interested in further information and best practices on digital customer onboarding? Then please get in touch with us.
