Atlanta-based software startup Relay Payments raised $43 million in January to expand its “lumper payment” platform. Photo credit: Shutterstock.com.
The process by which US truck carriers and freight brokers compensate distribution centers and other cargo receiving facilities for unloading freight has always been an inefficient thorn in the side of the domestic freight industry.
Those unloading fees — better known as “lumper payments” — generally are not included in the calculation of total freight costs and, as a result, have traditionally been settled by cash or check, a process that is inherently inefficient and often results in inaccuracies in billing and reconciliation, according to Ryan Droege, CEO of Atlanta-based software startup Relay Payments.
Relay raised $43 million in venture capital funding in January to help solve this problem by expanding its platform, which allows carriers and brokers to automate the lumper payment process via a “highly specialized payment network specifically tailored to companies in logistics.”
“The logistics industry still operates by cash and fleet card,” he said. “We offer instant electronic payment that saves time by reducing phone calls, authorizations, and approvals. From our standpoint, companies can save 20 minutes to one hour per stop by automating this process. That’s giving them back hours of service, which translates into revenue back for their fleets.”
Droege said Relay has created an environment similar to consumer payment platforms like PayPal or Venmo for lumper payments. The company currently works primarily with large nationwide truckload and less-than-truckload carriers for which managing unloading payment is a large pain point, he said.
“That’s why we’re able to drive the biggest [return on investment] for them by automating,” he said.
‘Auditable and trackable’
The size of Relay’s venture capital funding, raised over a six-month period in the second half of 2020 — its first outside investment — suggests its investors believe it is a big opportunity, but it also reflects Relay’s head start on the problem. Droege said building the capability to automate payments between individual carriers and receiving facilities has required building one-off connections that take time.
“We worked with [distribution centers] and warehouses in order to -implement some of these changes,” he said. “It requires not only participation from the carriers, but the facilities that they drive into. And there are a lot of smaller, one-off groupings of facilities. We added facilities one at a time and carriers one at a time.”
Relay’s approach benefits receiving facilities by making lumper payments more secure, Droege said, since personnel is no longer handling large amounts of cash or checks. Lumper fees can range from $50 to a few hundred dollars per shipment, depending on the type of freight and receiving facility.
The system is also designed to reduce time spent by those facilities receiving and processing cash- and check-based payments. For carriers and brokers that manage lumper payments, the system turns payment automation into “an auditable and trackable process,” Droege said.
“You can’t build technology on top of cash or even paper checks,” he added.
The company currently processes more than 150,000 monthly transactions totaling over more than $300 million in payment volume annually. The recent funding will be used to accelerate growth, develop new products, and expand the team, the company said in a statement in January.
Relay doesn’t act as a bank, but instead operates as a clearinghouse with partner banks. Droege said while the company’s initial focus has been on large truckload and LTL carriers to maximize the company’s network effect, its solution works with any size of carrier. Relay is paid a fee per transaction, with the size of the fee dependent on the size of the fleet and the number of transactions a carrier or broker has.
“It’s linear benefits all the way up,” he said. “Large fleets see the same return on a larger group of transactions as a smaller fleet.”
Contact Eric Johnson at [email protected] and follow him on Twitter: @LogTechEric.
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