The emergence of digital B2B marketplaces is driving a new demand for innovative forms of trade credit insurance.
Credable, a Euler Hermes insurtech brand launched last year, is now working with three new B2B platforms to offer its credit rating capability and pay-as-you-go credit insurance on trades completed digitally.
Credable was the first stand-alone brand to come out of the Euler Hermes Digital Agency, a department of the global credit insurer tasked with rethinking the way trade credit insurance is provided.
Fully digital, Credable offers SMEs an on-demand insurance option that covers against late or unpaid invoices on a single invoice. It has two main features: first, it provides an instant ‘traffic light’ risk calculator, where an SME can search a potential customer (in a Euler Hermes database of millions of companies globally) and immediately see its creditworthiness.
Second, the SME can automatically get a quote for insurance coverage of a specific invoice, and instantly buy it. The solution calculates the premium cost based on the invoice size, the payment terms offered and the credit rating of the buyer.
Until now, Credable has been a standalone platform open to Swedish SMEs who wish to insure invoices in 24 jurisdictions across Europe. But the insurtech company has embarked on a new strategy to integrate its solutions with the wave of new digital platforms coming to market at the moment.
“Our most exciting partners are the marketplaces – platforms where traditional analogue trading is getting digitised,” Richard Garnier, managing director of Credable, tells GTR. “That’s a very interesting use case for Credable and a nice evolving application for our capabilities. When people are trading on these platforms, they want us to identify the buyer and use our ability to insure the trade that they are about to do.”
Among the marketplaces that Credable are working with are Commoditrader, a Denmark-based digital marketplace for agricultural commodities, and the Seafood Portal, a similar concept for seafood, operated by Norwegian JET Seafood. A third partner, which is launching a digital marketplace later in the year, has not yet been publicly named.
What these platforms have in common is that they are bringing centuries-old marketplaces into digital formats in order to help small businesses connect to more trading partners, provide more transparency over fees and prices, and cut out expensive middle-men.
Commoditrader, for example, which went live in May, was formed to support farmers in Denmark who today rely on brokers and pay high transaction costs to do business. The platform digitally matches buyers and sellers (both locally and across borders) and enables users to close trades digitally. The solution first launched in Denmark and will be expanding throughout Eastern Europe over the next couple of months.
Credit insurance in one click
A critical aspect of these online B2B marketplaces is to help businesses find and connect easily with new – and therefore unknown – trading partners. This means taking on new risk.
“We are opening up the market and giving more transparency and comparability of prices and helping farmers to start trading with new partners,” Ida Boesen, co-founder of Commoditrader, tells GTR. “If a farmer is going to trade with partners that he doesn’t know of, management of financial risk becomes key. This is where we started looking for a solution that can help those at the farm-level start to do business with trade partners that they don’t know.”
That’s why Commoditrader decided to partner with Credable. The integration with the insurance platform means that when a Danish farmer uses Commoditrader to find a new buyer in, say, Eastern Europe, it can automatically do credit checks on that potential customer. And if the trade is completed, the farmer gets the option, at check-out, to insure the trade. The integration also means sellers have the option to segment prices depending on a buyer’s credit risk.
“When you digitalise the insurance, it becomes more accessible and it becomes as easy as booking insurance with a flight,” Boesen says.
This way of providing insurance cover is a unique approach in the world of trade credit insurance, where companies typically have to sign up for a one-year overarching policy and make a lump sum investment at the beginning of the year. Another alternative is for them to go their bank for a payment guarantee.
“Today, in Denmark, the only option a farmer has is to get a bank guarantee, which is most often 3-4%, sometimes 4.5%, to make sure that he is getting paid for what he is selling,” Boesen says, adding that many farmers won’t even have access to this option, nor do they have the resources to take up traditional trade credit insurance programmes.
According to Boesen, the rise of digital marketplaces like Commoditrader is bringing about a need for insurance companies to rethink their offering. She says her company has been approached by many insurers seeking to play a role on the platform, but only Credable had met the criteria of making the product easy and digital to consume.
Equally, Commoditrader is looking for trade finance partners that could fund trades through the marketplace, but also here the company has found a lack of suitable partners.
“Trade finance part is part of our roadmap,” Boesen says. “But we haven’t found any good solutions yet. It has to be someone who wants to solve some of today’s complexities and make it accessible in the same way as Credable is doing with credit insurance.”
Credable, meanwhile, as one of the only companies in the world to offer digital and on-demand trade credit insurance, is seeing huge opportunities ahead. As more and more analogue trading communities go digital, the demand for value-added services that support this way of working will grow, says Garnier.
Credable is also exploring how to link with other types of digital platforms, such as invoice management systems and accounting software, having already integrated with Fortnox, a leading Swedish software provider for companies and accounting and auditing firms.
According to Garnier, Credable’s ability to provide on-demand insurance is also an attractive proposition to factoring and invoice financing platforms, and the insurtech company is now working on an application to reinsure financing activities on such platforms on a pay-as-you-go basis.
