Handling crew pay has historically been a complex part of running a ship, typically involving large-scale payment in cash. This adds cost, logistical difficulties and administrative overhead for the operator, and many are now switching to electronic payment systems to reduce this burden. Amidst financial disruption for thousands of Ukrainian and Russian seafarers due to the crisis in Ukraine, instant cross-border electronic payment has become more timely than ever. The Maritime Executive recently caught up with Stuart Ostrow, president of digital payments company Shipmoney, to hear his insights into this developing field.
Many cruise lines and commercial shipping companies use ShipMoney to handle crew pay - why have they picked your service?
We started this industry many years ago and have vast institutional knowledge and experience, along with our state-of-the-art purpose built Maritime Account Management and Payment Processing System that we fully own and operate in-house. Since we are vertically integrated as both the Program Manager and Payment Processor, which is unique among our competitors, we are in a much better position to develop very specific solutions to meet the needs of each of our clients. This is especially the case in the commercial market because the requirements of a ship owner in Germany can be vastly different then the needs of a ship management company in Cyprus.
Many of our solutions are confidential, but a good example of our technical capabilities with integrating our platform with a client’s crewing system is synchronization of data. While a crew member is onboard, the ability to update an email address and phone number is disabled within our App requiring the crew member to update this information within the client’s Onboard Crew Member App which in turn pushes the update to our system. When the crew member is not onboard, the ability to change their email address and phone number is re-enabled and this updated data is pushed back to the client’s crewing system ensuring that demographic data sets are in synch.
The client also wanted to provide a way for crew members to withdraw cash on their ships, but did not want to install ATMs. We developed l an integrated multi-currency virtual ATM. A crew member logs into our App and requests funds from their ShipMoney account. The funds request is placed in a queue for a scheduled time when the crew purser is available to fulfil the request. Crew can only request funds from the ship they are working on and this service is disabled once the crew leaves the vessel. For the client’s larger ships, we developed an enhancement that utilizes specialized cash dispursement machines which are a much more modern and sophisticated version of ATMs, which are based on very old technology.
It's a slick, specific solution that was developed specifically to meet their needs. We can do that because we own our own processing platform. Everything that a client or a crew member touches is developed and owned in-house.
As we grow and develop in the commercial space, we have been learning that the needs of each company are unique and different. For example, Scorpio is a client of ours, and they had very complex reporting needs because they are actually two publicly traded companies, Scorpio Tankers and Scorpio Bulkers (now Eneti). We developed specialized solutions to meet their treasury and compliance needs regarding segregation of funds and reporting.
Which sectors use your service the most?
Well, the cruise industry is where we got started with digital payments.. Not too long ago, the industry used to pay virtually all of their crew members worldwide in cash. It's actually quite remarkable - a Brinks truck would back up to the port with a million dollars and two security guys would walk up to the ship. They would sign it over to the crew purser, and a couple of people would spend all night breaking the million dollars into envelopes. And the crew members would stand in line the next day to get their pay. And that's how the entire industry paid its crew. Today, the entire cruise industry has switched to some form of a digital payment system,
The commercial shipping industry still pays crewmembers with a combination of cash and wire transfer. For example, a crewmember may take $500 in cash on the ship and $2,000 will be sent home to his family by wire.
This is expensive and administratively inefficient, because the shipowner or ship manager has to keep the ship supplied with cash and has to pay for wire transfers for every crewmember. We saw an opportunity to impact the commercial space similar to how we changed the cruise industry in terms of how crew pay is administered.
With our solution, crewmembers can get paid instantaneously, in real time. And at their leisure, they can send money home. If they want to send it to a bank account on payday, they can create a bank beneficiary and schedule it. If they want to send money via Western Union or MoneyGram, they can schedule these as well.
Vessel operators find that they can reduce the amount of cash they keep on board by using a digital alternative. We're finding that most of the expenses that seafarers have in transit these days - even taxicabs - can be done as a cashless transaction in most parts of the world.
How much could the shipowner save by switching?
Savings can be calculated in numerous ways. Owners/managers have substantially reduced costs which in turn deliver ROI savings ranging from thousands to hundreds of thousands per annum. Not to mention the cost savings for crew which can be hundreds of dollars per month.
For example the cost of delivery for cash to master in most ports is about three percent of the total amount, and in some parts of the world it's much more expensive. In parts of Africa we've heard of costs north of 10 percent.
Wire payments can also be very expensive. They can be $12, $15, $18, and we've heard prices as high as $25. Then there are also the administrative costs of managing the beneficiaries and making those payments. What happens if a crew member gets divorced and doesn't want money to go to that bank, or they change banks? The seafarer can handle all of that themselves, on their own terms, if the shipowner uses ShipMoney.
Has the pandemic changed how shipowners think about crew payments?
We're in a very traditional industry and some companies are more forward-thinking than others in terms of adapting to change, but the pandemic has forced all of us to change. We've had a really good run in terms of bringing new clients onboard over this period of time. I believe it's a permanent and structural shift away from cash to master, and that's basically what we are trying to enable.
Are you working on any new features that you might be able to share with our readers?
Yes, we're also working on a proprietary payday advance solution that will reduce capital requirements for clients and provide a valuable benefit for crew. The maritime industry pays crew monthly which can create difficulties if there are financial needs mid-month. For example, let's say it's the 10th of the month and the crewmember has a personal emergency and needs funds. The crew member can log into his account to request a cash advance. The funds will be credited to his ShipMoney account instantaneously.
Given the ongoing crisis in Ukraine, how are Ukrainian and Russian seafarers getting paid and managing their money?
We are acutely aware that Ukrainian and Russian seafarers are very concerned about access to their salaries with many asking their employers not to send money to their bank accounts.
We are utilizing our eWallet solution (Visa Virtual cards) which will enable crew members to receive and manage their salaries in secure US dollar accounts which are accessed via a mobile App after a simple registration process.
ShipMoney eWallets will facilitate:
Our Client Management Team is very experienced in helping clients set-up these systems quickly. We have a very large shipmanagement company with complex reporting needs and dozens of client admins in multiple offices accessing our Card Management System that we deployed our eWallet solution in less than 3 weeks.
We hope that this goes some way to helping our card holders in these extremely worrying and difficult times. Our thoughts are with all affected crew members and their families.
