The journey of seafood from ocean to table is one of constant danger for the people who make up the fishing industry. Refrigeration technology can fail. Transport can be delayed at borders. Markets and currencies can fluctuate in seemingly strange ways, sucking profit from the season’s labor.
The payments industry can’t do much about those first two factors. But as Jeff Matheson, senior vice president at Cambridge Global Payments, discussed in a recent PYMNTS interview, the seafood industry still has a few things to learn about managing risk and hedging bets.
“Timing is key,” he said when asked about the most important payments factor for seafood industry clients.
That, of course, is obvious — rotted fish serves almost a base-level, primitive-type nightmare for the human species, a symbol found in art all the way back to ancient times. But that statement also serves almost as a mission statement for wholesale seafood transactions. Fishing is a longstanding cross-border activity, a pursuit that involves not only the chase for good product in international waters, an activity governed by a knot of treaties, but also constant trade across borders.
Now the challenge is to bring digital, efficient forms of payments, and associated risk management, to one of the oldest industries in the world, one that predates recorded history.
Still Some Paper
First, it’s a good idea to get rid of some possible assumptions and faulty notions.
The seafood industry, even in the New World, may be old, but that doesn’t mean its participants await incoming shipments of fish on the dock, calculating marketing rates and payments with an abacus. Sure, “there is still a bit of paper involved” in seafood B2B transactions, Matheson said, “but in the last five years, (the industry) has moved hard to make payments electronic.”
Of course, making the move away from paper payments— an effort gaining steam in two other ancient industries, construction and government — is part of what Cambridge Global is trying to do. “We are helping them to not have to send checks across borders,” he said.
Cambridge Global treats the seafood industry as a vertical market, and takes lessons from the firm’s experience with offering payment services to manufacturing clients, who are involved in the business of exporting their products. “If you look at the seafood industry, that’s all it really is, exporting products,” Matheson said.
That said, unlike most manufacturers — and, apparently, most eCommerce operators, including Netflix — the seafood industry is not yet up to speed on hedging against currency fluctuation, he said.
“A lot of them do not have experience with risk management strategies,” Matheson said.
He added that while a seafood company might have a century or more of business experience under its belt — Cambridge Global mainly serves Canadian and U.S. seafood firms — and is likely to be “very well-versed in foreign exchange and risk management strategies,” they have not always made the move to full-bore risk management. Instead, their view is more short-term than long-term. “They are very much looking at their exposure day to day” instead of month to month or longer, Matheson said.
The seafood industry clients already served by Cambridge Global, and the companies they hope to sign, rely on what he called “traditional banking platforms.” Seafood companies often use those platforms to automatically deposit U.S. dollars into Canadian accounts — or vice versa — leaving those firms at the mercy of that day’s exchange rates.
A better way is to offer a holding balance service that enables the client to have a measure of choice about delaying that deposit until exchange rates are more favorable. “There’s a lot more flexibility,” he said.
Another way to improve payments for seafood companies is to analyze their books, study the flows of their seasonal cash flows and develop a hedging plan around that — or, in Matheson’s words, “protect their profit six to 12 months out.”
Inertia can be a foe in trying to move seafood companies to a hedging and risk management mindset — some small to medium-sized fishing operations that have weathered difficulties and bad seasons for more than 100 years might be reluctant to move away from what they know best, he said.
“But we give them case studies” and offer other examples of how risk management can lead to more profit, Matheson said. That pitch can hit especially well if that company exports to China, a prime market for the Canadian and U.S. seafood industries — one that could see changes depending on how the budding U.S.-China trade war develops.
Seafood is one of the world’s bedrock industries, and also one that is exposed to constant change from multiple angles. Digital payments and hedging could introduce another dose of modernity into that ancient business.