The PortPayables services’ aim is to perform reliable and fully compliant port transactions for shipping companies, securing more favourable terms for its clients than they would otherwise be able to secure on their own.
Domenico Carlucci
Financial Services Director
DA-Desk is the largest independent provider of port cost management services to the shipping industry. Founded in 2001, the company addresses an important need in the whole shipping industry; each time a shipping company docks a vessel, it must transfer funds in advance to a port agent for payment of voyage-related costs. DA-Desk has established a global financial platform that facilitates these payment transactions between the two parties. This set of services is known as PortPayables and was established in 2004.
Problem…
“The business logic behind this service is highly persuasive,” says Domenico Carlucci, Financial Services Director at DA-Desk. “Because we handle such a large volume, PortPayables is able to negotiate improved conditions per individual payment and to ensure a timely delivery of the funds to the beneficiaries.” In 2011, PortPayables transferred several billion dollars in payments for its shipping clients to the appointed port agents and is expected to continue this growth trajectory and double the volume of operations in the next three years.
Historically, the US dollar has been the backbone of the shipping industry in terms of the payment of freight; however port charges are originally borne in local currencies. Industry stakeholders are therefore exposed to FX risk every time a payment in US dollars is converted. DA-Desk’s services have proved to be a huge success. By 2010 it found that it could use the business’s scale to further enhance value for customers through improving their banking terms. In order to do this DA-Desk needed three things: an electronic banking platform that allowed the initiation and execution of payments in a single operation; a superior service quality offered by its banking services provider; and a timely and secure execution of the payment to the beneficiary, fully compliant in all respects. This last point was extremely important: if DA-Desk missed a payment for its client, the shipping vessel could be arrested and the vessel operating company could lose $40,000-50,000 each day. “In our industry, time really is money and we are proud none of our client’s vessel has ever been arrested, due to delayed payment execution,” says Kalyan Raman, PortPayables Manager at DA-Desk.
…Solved
“We needed a bank that had a large footprint everywhere in the world. It had to have a great platform to execute payments on time and an ability to deal with exotic currencies, such as the Brazilian real, Russian rouble, Chinese renminbi and Colombian peso – which are all very important in the industry,” says Carlucci.
After a tender to several major banks in mid-2011, Citi was chosen as the current DA-Desk’s new financial counterparty. “They were able to offer us efficiency, transparency and innovation,” says Carlucci. Citi provided competitive spreads and transparent FX rates for the port cost management business.
With the help of Citi’s solution, PortPayables moved to the payment file upload solution last month. The logic behind the new accounts payable system is clear. “In the past, we used to transact each payment manually, one by one,” says Carlucci. “But now, we upload multiple transactions simultaneously through a single file and send it to Citi. Once the bank receives the payments, it processes them in a single go. There is a substantial increase in control and efficiency.” Moreover, the instant availability of the SWIFT message (MT 103) allows the beneficiary of the payment to receive a payment confirmation. So even in the rare case that a payment is delayed in transit, the shipping vessel can still clear the port. By integrating its system with Citi’s, DA-Desk is now in a position to accommodate a variety of payment formats under one roof. Carlucci adds: “We can now easily identify elements that are missing and are able to achieve nearly 100% straight through processing (STP) rates. Citi’s solution has benefited us enormously from that perspective.” The agreement was reached at a formal meeting held in Dublin, with the solution implemented within two months. A clear-cut service level agreement (SLA) allowed DA-Desk to determine the timelines and relative importance of each service provided by Citi. Communication also played a fundamental role during the implementation stage. Daily phone calls were bolstered by a thorough weekly review.
“On top of this, Citi was able to offer DA-Desk superior client delivery service by means of two service teams,” says Raman. An internal team based in London is dedicated to DA-Desk, helping with product development, while a local team in Dubai responds to technical requirements. The next step of the DA-Desk and Citi’s relationship will be developing innovative products tailored to the future of the shipping industry.
