Navigating the perils of seafarer salary payments – how fintech is finally catching up
Yet despite its global significance, this group continues to be ignored and excluded from many of the digital innovations those of us on land take for granted. For instance, something as straightforward as being able to receive and access salary payments quickly, easily, and from anywhere in the world has long been unavailable to most seafarers. Moreover, human resources and payroll processing functions on a ship often necessitate a considerable amount of administrative work and rely on non-automated processes. These outdated methods to pay seafarers can easily lead to delays in getting their salary to them.
In other areas of the shipping industry, such as navigation and onboard communications, there are significant innovations that have increased digitalization and improved efficiency. However, the digitalization of seafarer salary payments is continuing to fall behind, especially when compared to the progress and digital acceleration seen across consumer markets and businesses in other sectors.
The perils of cross-border payments
While it sounds like a simple problem to solve, paying seafarers in is notoriously difficult. This is because traditional financial systems are simply not fit for this purpose. Payments can take weeks to arrive, and both employers and employees may encounter a multitude 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 seafarer. Through his work, he was able to support 10 members of his family with his salary. However, he was paid with a mix of cash and SWIFT transfers. In reality, there were often long delays in getting paid because of these outdated payment methods. Additionally, whenever he needed to send money home or somewhere else, he had to fill out a vast amount of paperwork for remittance services, which led to even more delays and additional costs. This complicated process inspired us to create Kadmos in order 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 The complexity in paying seafarers, coupled with the outdated methods available to shipping companies, often creates salary payment delays. This creates stress for many seafarers who need their salaries to send home to their loved ones. In reality, one of the only reasons why so many choose to work such long hours away from their families in the first place is to use their salaries 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 to20% of salaries in shipping today, equal to more than $10bn annually, are paid in cash. This is not only highly insecure, but it’s also expensive, with employers paying as much as 5 – 12% of the underlying value to get cash on board. What’s more, seafarers are often exposed to unfavorable FX rates and other fees to exchange money or send it back home.
Fintech starts to catch up
Thankfully, change is coming. First, the number of maritime-related fintech patent filings tripled in the first three months of 2022, compared to the same period last year. Second, there is a growing number of fintech companies helping to change the status quo of the maritime industry.
At Kadmos, we’ve built a secure salary payments platform for shipping companies, where employers can pay their seafarers instantly. Our end-to-end solution means employers can dramatically reduce expenses and administrative work. In turn, seafarer workers save on transaction costs and keep more of their salaries.
One of the key innovations is the way in which we have created flexible payout and transfer options that are not completely reliant on the SWIFT system. We also allow seafarers to access their money on-demand via debit cards that are tied to e-wallet accounts and are accepted across the globe. The world of shipping requires constant innovations to increase efficiency and lower costs and Kadmos’ mission is to bring the latest in fintech to shipping while adapting it to the unique demands and challenges of this industry.
From a want to a need
There is also a much wider, more significant benefit of implementing fintech innovations. It makes the shipping industry a more attractive, robust, and future-proofed place to work. Just this month we’ve seen a law that seeks to safeguard seafarers’ wages presented to the UK parliament, another step in the right direction.
But as a sector, maritime has not been immune to the Great Resignation trends being seen elsewhere in the market. This is expected to continue throughout the next 12 months with the most recent Seafarer’s Happiness Index finding that “a growing number of respondents” are looking for a way out as they no longer perceive 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 crew commercial ships if action is not taken to increase numbers. This raises substantial risks for global supply chains.
To prevent this from happening, the sector has to become more appealing. This is not just important for the sector itself, but the entire global economy. The ICS even calls out traditional payment processes as one of the threats restricting such freedom of movement.
As has been seen in other industries, fintech goes hand-in-hand with innovation. Embracing the technology goes beyond the transactions and helps to attract new audiences, enable new use cases, push progress forward, and break down barriers. This is not just what the maritime industry wants, it’s what it needs.
Source: Written by Kadmos’ co-founders Justus Schmueser and Sasha Makarovych, arranged on behalf of Hellenic Shipping News Worldwide (www.hellenicshippingnews.com)