How Fintech solutions can fight inflation

The perfect storm of inflation, shrinking margins, tight labor markets, global turmoil and a shipping recession threatens to compound the impact on the freight industry. The Owner-Operator Independent Drivers Association (OOIDA) warns that if inflation continues and the labor market weakens, freight volumes will fall, putting the industry in the eye of the storm.

Many companies are already undercapitalized or have excessive debt for equipment after increased demand in the first half of the year.

Making it through these challenging times will require an intense focus on closely monitoring cash flow, margins and operations. FinTech offers some potential solutions.

Despite some innovation, the trucking industry has been fairly traditional in its approach overall, with many of the same legacy players in the market. Today, however, the rise of smaller, challenger companies has introduced greater innovation. Newer Fintech companies in the trucking industry are changing the game by focusing intensely on drivers and their needs.

Innovation in logistics and trucking technology has resulted in a huge influx of venture capital as more companies emerge to serve various parts of the logistics chain. The sector raised more than $27.5 billion in 2024 – an 80% increase from the previous year. Logistics providers with a focus on warehouse management, cargo, forwarding, supply chain and last mile logistics are seeing significant investment. So are FinTech companies that focus on the shipping industry.

FinTech solutions for owner-operators

The rise of FinTech directly addresses some of the more common pain points for owner-operators and carriers, especially as inflation has made it more challenging for them to run their businesses. As drivers see higher costs and lower margins amid unpredictable shipping schedules, FinTech solutions offer alternatives to legacy models that require drivers in need of cash flow to pay high fees or wait long periods before getting paid.

For example, let’s say that fuel normally costs $500 to complete a load, but it is now $750 due to price increases and geopolitical dynamics. Previously, a driver could have $500 on the fuel card or in the bank and be able to complete the load. Today, they may not have that extra $250 on hand and then can’t take on the next job that could earn them $2,000.

It can become a vicious cycle where the inability to complete one load cuts the cash flow to finance any future loads. Margins are shrinking and it is becoming more difficult to run a sustainable business.

Redefining factoring

When we are in a period of low inflation, drivers are more comfortable waiting 30 days to get paid, even if it is frustrating. In high inflation times like today – with tight margins and high fuel costs – drivers need money in their account as soon as possible to pay for expenses to pick up their next load.

Traditional factoring companies tie drivers to long contracts with high rates of up to 5-7%. Attempting to terminate these contracts early can result in penalty fees ranging from $2,500 – $5,000. For an owner-operator whose margins are already tight, that’s a big financial hit and is rarely a realistic option.

New FinTech solutions compete with factoring companies by doing business with increased flexibility, waiving termination fees and allowing drivers to start and stop as needed. These FinTech solutions also reduce factoring fees. Some offer non-recourse factoring at half the price, as low as 2.5%.

New FinTech factoring companies are also innovating on payment speed and methods. Traditional factoring companies have longer approval workflows, document submission limits, and rely on the ACH network or wire transfers. This combination of factors leads to processing times of 24-48 hours to pay drivers. New technology solutions leverage payment cards and tighter workflows to issue payments in less than a day, allowing drivers to optimize cash flow and keep operations running smoothly.

Redefinition of fuel card

New VC investments have given rise to newer players in the fuel card space, challenging the traditional way of doing business.

Most fuel cards work in networks, so truckers have to use certain suppliers. If you go out of network, you’ll often face a penalty fee – it’s actually similar to the healthcare model. Newer FinTech solutions serving the trucking industry are moving away from traditional fuel card networks and building their payment platforms on established credit providers such as Visa. This gives drivers greater choice in where they buy fuel.

New fuel cards work more like business credit cards, offering greater flexibility, allowing the purchase of essential items beyond fuel, and helping drivers build their business credit history. Cashback on discounts can be used immediately on the card instead of waiting to receive discounts at the end of the month.

Instead of drivers having to wait a month to get rebates for discounts at preferred providers, newer entrants also provide instant cash back without waiting.

Provides deeper business intelligence

Freight technology providers that incorporate FinTech solutions into their offerings also unify different systems and the tools owner-operators use. In the past, for example, drivers may have used one company for factoring, another for a fuel card, a business bank account with a financial institution and an equipment finance loan from another lender. No organization provided a complete picture to help owner-operators run their businesses effectively.

New technology platforms that integrate FinTech solutions can bring all these separate systems into one end-to-end system. By integrating everything into one financial dashboard, drivers get a connected ecosystem and a holistic view of the business. They get paid in one place and automatically link funds to their card, and they can also use their payments to pay off loans or put surplus into their business account. We are likely to see increasing convergence in this way – where drivers can manage everything with one technology provider, making business management as easy as possible for trucking contractors and truckers.

The future of FinTech in trucking

As FinTech continues to redefine the standard way of doing business, owner-operators can leverage efficiencies to better control cash flow, payments and operations. While it is particularly useful in times of inflation, it can also help increase profitability when inflation subsides.

Drivers often choose to work as company drivers so they don’t have to deal with cash issues or worry about managing a business. As a trade-off, they have less flexibility over the hours and routes they run. New trucking platforms with FinTech solutions open opportunities for drivers to run their own businesses and grow and expand. As drivers continue to book loads, generate profits and build credit with FinTech solutions, these tools also open the door to better financing opportunities in the future.

While freight logistics may still be in the middle of the storm front, we can see a sunnier forecast for the future. FinTech in trucking helps batten down the hatches during the inflationary storm and speed recovery on the other side.