Real-time payments in the transportation sector: evolving faster than ever

Small and medium-sized businesses (SMBs) in the transportation sector, including trucking and delivery services, face many challenges today, including rising gas prices, labor shortages and inflation that drives up the cost of moving goods. One often overlooked issue is the complications of legacy payment systems. Many businesses still rely on outdated transaction methods like paper checks and money orders for everything from paying workers to settling invoices with suppliers. These payments are prone to delays, errors and other issues.

The integration of real-time payment systems could make transactions in the transportation, trucking and delivery sectors faster, simpler and more secure. While some companies in these sectors are hesitant to adopt real-time rails due to their lack of familiarity, those that have adopted the technology report increased efficiency, healthier balance sheets and a stronger overall financial outlook.

Traditional Payments Slow Down Transportation Companies
Lack of awareness slows adoption of real-time payment
Faster payments improve financial health
Implementation of real-time payments in the transport sector

Traditional Payments Slow Down Transportation Companies

The transportation industry is using real-time payments at a much higher rate than other industries. According to a PYMNTS Intelligence study, 73% of transportation SMBs have used real-time payments in the past 12 months. Even so, paper checks remain the most popular payment method overall, accounting for 57% of total payment volume.

Checks remain the primary payment method used by transportation companies, but real-time payments are catching up.

PYMNTS Intelligence research found that paper checks were the most common form of payment for transportation companies. Checks accounted for 57% of total payment volume, followed by automated clearing house (ACH) payments at 51% and credit cards at 50%. Real-time rails are quickly gaining ground, however. Nearly half of SMBs in the sector cite instant payment options as their most frequently used method for sending payments. This suggests that while large transportation companies continue to rely heavily on traditional payments, smaller businesses are adopting advanced payment technologies more quickly.

57%

of all payments in the transport sector are made using paper checks.

Truckers appreciate the seamlessness and convenience of real-time payments.

Traditional payment methods, like paper checks, can be frustrating to cash or deposit. This is especially true for truckers who spend a lot of their time on the road and don’t have the convenience of visiting a bank or ATM. According to a PYMNTS Intelligence study, 80% of truck drivers say instant payments are much more convenient for them. Fifty-eight percent appreciate knowing the money is in their account without requiring manual intervention. Additionally, about 32% of truckers say having immediate access to funds can help them pay their bills on time, which can be difficult if they have to cash their paycheck first.

Lack of awareness slows adoption of real-time payment

While real-time payments can improve logistics and revenue across the transportation industry, many companies are still hesitant to implement these systems due to concerns about their perceived complexity.

SMEs in the transport sector consider instant payments too complex to use.

24%

transport SMEs that have not used digital payments say their banks don’t offer them.

A PYMNTS Intelligence study found that among transportation SMBs that haven’t sent instant payments in the past year, 29% cited difficulty of use or lack of knowledge. 23% felt instant payments were too expensive. 24% said their banks don’t offer the service, while 22% cited a limited number of recipients that can accept instant payments. Therefore, banks need to implement these services and help their transportation customers understand their capabilities.

Lack of education is the main barrier to real-time payments.

Cheryl Gurz, vice president of RTP product development at The Clearing House, told PYMNTS Intelligence that while many transportation CEOs view real-time rails as difficult to use, that perception doesn’t reflect reality. Many transportation SMBs and consumers are confused by the wide variety of faster payment solutions available, such as Zelle, PayPal, and Venmo. They often don’t understand how instant payments work on RTP.^® Do the networks differ or what benefits do they actually offer?

“These are precision payments, delivered at the right time through your trusted banking partner,” Gurz said. “The benefits are greater than many other payment methods, largely because the transactions are irrevocable. If you get a payment at 2 p.m., you can go ahead at 2:02 p.m. and make that payment to your supplier. There’s no going back.”

Gurz noted that while many banks have updated their systems to facilitate real-time rails, they have not effectively communicated these updates to their customers. Therefore, it will be up to banks and financial institutions (FIs) to inform transportation companies of the availability and benefits of the RTP network, integrate it into their online banking platforms, and promote its use.

Faster payments improve financial health

If companies can overcome their hesitation to adopt real-time payments, they could strengthen their financial position, thanks to more accurate accounting and increased employee satisfaction.

93% of truckers would use instant payments if it were offered to them.

Additionally, a PYMNTS Intelligence study found that 91% of truck drivers who receive real-time payments prefer them because of their speed and guarantee of sufficient funds. Additionally, more than half say safety is an important consideration. Currently, however, only two in five truckers receive their pay through these channels. Trucking companies that implement these payments could gain a competitive advantage in recruiting, as well as improve employee satisfaction and retention.

85%

of transportation SMEs generating between $1 million and $10 million per year and using instant payments report very or extremely low payments healthy balance sheets.

Three-quarters of SMEs in the transport sector that use instant payments have healthy balance sheets.

PYMNTS Intelligence research also shows that 85% of companies generating $1 million to $10 million annually report very or extremely healthy balance sheets. That’s compared to just 54% of those that primarily use non-instant methods. Among transportation companies that sent instant payments in the past year, 68% cited increased speed as a key benefit. Thirty-seven percent said it was the most important factor. Other top benefits included ease and convenience (16%) and better cash flow management (15%). For transportation SMBs receiving instant payments, 40% of respondents identified speed as the most important benefit. These benefits have led to happier accounting teams and improved cash flow efficiency.

Implementation of real-time payments in the transport sector

Real-time payments provide immediate benefits in terms of cash management and employee satisfaction. With instant funds transfers, transportation companies can receive payments from customers and settle invoices from suppliers almost instantly. This rapid movement of money reduces the need for large cash reserves and improves working capital efficiency.

Additionally, offering instant pay can be a powerful recruiting and retention tool. Drivers and other employees can access their earnings immediately after completing their work, rather than waiting for the next pay cycle. This flexibility is especially valuable for long-haul truckers, who may need funds while on the road.

Despite these benefits, some industry players may find real-time payments difficult to implement or unfamiliar. To address this, transportation companies can start by introducing real-time payments in specific areas, such as driver payroll or customer reimbursements, before expanding to other use cases. This phased approach allows for gradual adoption and helps build trust in the technology. Additionally, an intensive outreach effort by banks and financial service providers could prove beneficial.

The article Moving Faster Than Ever: Real-Time Payments in Transportation appeared first on PYMNTS.com.