Navigating the perils of seaman’s wage payments – how fintech is finally catching up

Ein the same year, as much as 90% of worldwide trade passes through the maritime transport system. This means that the movement and safe delivery of almost all of our vital food, medicines and technologies depends on the commitment of a huge, diverse and growing group of international seafarers. Their work is so central that it has been described by the United Nations as “the backbone of the global economy”.

Despite their global importance, this group continues to be ignored and excluded from many of the digital innovations that we on land take for granted. For example, something as simple as being able to receive and access salary payments quickly, easily and from anywhere in the world has long been out of reach for most seafarers. In addition, human resources and payroll processing functions on a ship often require a significant amount of administrative work and rely on non-automated processes. These outdated methods of paying seafarers can easily lead to delays in getting them paid.

Within other areas of the shipping industry, such as navigation and communication on board, there are significant innovations that have increased digitization and increased efficiency. However, the digitization of seafarer wage payments continues to lag behind, especially compared to the progress and digital acceleration seen across consumer markets and businesses in other sectors.

The dangers of cross-border payments

Although it sounds like a simple problem to solve, paying in seafarers is notoriously difficult. This is because traditional financial systems are simply not suitable for this purpose. It can take weeks for payments to arrive, and both employers and employees may encounter a range of additional fees and costs when transferring money.

This was something we had experienced firsthand. One of our founders, Sasha Makarovych, has a relative who is a sailor. Through his work, he was able to support 10 family members with his salary. However, he was paid with a mixture of cash and SWIFT transfers. In reality, there were often long delays in getting paid due to these outdated payment methods. In addition, when he needed to send money home or elsewhere, he had to fill out a huge amount of paperwork for money transfer services, which led to even more delays and additional costs. This complicated process inspired us to create Kadmos to help both shipping companies and seafarers by making the salary payment process more transparent, secure and efficient.

Research has shown that the average ship has a mix of at least three nationalities on board, and usually many more than that, creating regulatory and logistical headaches when it comes to paying them. The complexity of paying seafarers, combined with the outdated methods available to shipping companies, often creates delays in the payment of wages. This creates stress for many seafarers who need the salary to send home to their loved ones. In reality, one of the only reasons so many choose to work such long hours away from their families in the first place is to use their wages to support them.

On top of this, when transfers are too slow or seafarers want to spend on the go, they are often forced to use cash. In fact, it is believed that up to 20% of wages in shipping today, equivalent to more than $10 billion annually, are paid in cash. Not only is this highly uncertain, but it is also expensive, with employers paying as much as 5 – 12% of the underlying value to get cash on board. In addition, seafarers are often exposed to unfavorable exchange rates and other fees for exchanging money or sending it home.

Fintech is starting to catch up

Fortunately, change is coming. Firstly, the number of maritime-related fintech patents tripled in the first three months of 2022, compared to the same period last year. Secondly, there is a growing number of fintech companies that are helping to change the status quo in the maritime industry.

At Kadmos, we have built a secure salary payment platform for shipping companies, where employers can pay their seafarers immediately. Our end-to-end solution means employers can dramatically reduce expenses and administrative work. In turn, seafarers save on transaction costs and keep more of their wages.

One of the most important innovations is the way we have created flexible payment and transfer options that are not completely dependent on the SWIFT system. We also allow seafarers to access their funds on demand via debit cards linked to e-wallet accounts and accepted worldwide. The shipping world requires constant innovations to increase efficiency and lower costs and Kadmos’ mission is to bring the latest in fintech to shipping while adapting to the unique requirements and challenges in this industry.

From a wish to a need

There is also a much broader and more significant benefit of implementing fintech innovations. This makes the shipping industry a more attractive, robust and future-proof place to work. Just this month we have seen legislation seeking to secure seafarers’ wages presented to the UK Parliament, another step in the right direction.

But as a sector, maritime has not been immune to the major resignation trends seen elsewhere in the market. This is expected to continue over the next 12 months with the latest Seafarer’s Happiness Index showing that “an increasing number of respondents” are looking for a way out as they no longer see seafaring as a worthwhile, fulfilling or even safe career.

The International Chamber of Shipping (ICS) has previously warned of a shortage of merchant sailors to man commercial ships if measures are not taken to increase their numbers. This entails significant risk for global supply chains.

To prevent this from happening, the sector must become more attractive. This is not only important for the sector itself, but the entire global economy. ICS even names traditional payment processes as one of the threats that limit such freedom of movement.

As seen in other industries, fintech goes hand in hand with innovation. Embracing technology goes beyond transactions and helps attract new audiences, enable new use cases, push progress forward and break down barriers. This is not only what the maritime industry wants, it is what it needs.
Source: Written by Kadmos co-founders Justus Schmueser and Sasha Makarovych, hosted on behalf of Hellenic Shipping News Worldwide (www.hellenicshippingnews.com)