Triumph Bancorp in Dallas has developed an in-house tool to help it boost its factoring business.
A payment-processing product for freight vendors that the $3.5 billion-asset company quietly rolled out late last year has already attracted roughly 80 customers. The company expects TriumphPay to pick up dozens more in coming months when it starts to market the product more aggressively.
TriumphPay “will be very disruptive and transformative by the end of the year,” said Aaron Graft, Triumph's CEO. “I think you’ll start to see the numbers show up in the second half of 2018.”
While Graft declined to discuss how much revenue Triumph could generate with the TriumphPay, the company recently raised its targeted return on average assets to 1.80% from 1.50%. Revenue from factoring, which is the company's second-biggest business line, increased in 2017 by 14% from a year earlier, to $40 million.
Triumph had about $346 million of factoring loans on its books at Dec. 31; more than 80% were transportation related.
Triumph, which has been active in transportation factoring since its formation in March 2006, has played a role in more than 5 million payments to more than 50,000 truckers. Factoring involves the purchase of receivables from small businesses, in this case small and midsize trucking firms that need cash more quickly than their billing cycle delivers it.
TriumphPay serves the freight brokers that match shippers with truckers by providing an automated payment system that gives those companies a number of quick, convenient options to dispatch payments to cash-starved truckers. Brokers will pay a set amount each time they use the system, along with an additional charge for expedited payouts.
Graft, who has been Triumph's CEO since its creation, described the product as “reverse factoring.”
Triumph is hoping to tap into a relatively large national business.
Freight brokers' route loads are valued at more than $166 billion annually, said Tom Malloy, a spokesman for the Transportation Intermediaries Association in Arlington, Va. Those loads are hauled in about 95 million shipments. In the third quarter, the association’s roughly 1,600 freight-broker members handled more than 1.4 million individual loads.
Triumph is deepening its involvement in factoring at a time when some banks are pulling back. The $222 billion-asset BB&T recently agreed to sell its $2 billion factoring portfolio to Rosenthal & Rosenthal, a nonbank commercial lender in New York.
Triumph, which developed TriumphPay in-house, has “slow played” its rollout as it perfects the technology, Graft said, adding that he expects to bring several large freight brokers on board in the next few months. That will trigger a more robust marketing effort.
“We’re marketers at heart, so once one of those folks is signed up and live you can imagine that we’ll be advertising that throughout the industry,” Graft said during a recent conference call to discuss quarterly results.
If TriumphPay lives up to its billing, it should go a long way toward filling a hole that opened up after Triumph announced it would exit health care lending. As part of the process, the company plans to sell its $68.7 million health care portfolio by March 31 in a deal that should produce a “small net gain,” Graft said.
Health care, while still a good business, proved more difficult to underwrite than expected.
“We as a management team felt we didn’t understand the risks as well as we should,” Graft said. “We just weren’t experts in the field.”
Triumph is not looking for any new lines of business to take the place of health care lending, Graft said. Rather, it plans to redeploy capital into existing lines — including transportation factoring, he said.
Transportation factoring is "intensely diversified," he said. "Think of all the things trucks haul. ... Our concentration in transportation offers us exposure to the GDP as a whole."