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Hokodo | Transforming Traditional Business Insurance | Louis Carbonnier

Louis Carbonnier

Co-founder & Co-CEO

Hokodo is a fintech startup that uses innovative technology to develop insurance and finance solutions that protect companies participating in B2B trade. Through its APIs, Hokodo empowers its distribution partners to offer simple contextual insurance products at the point of transaction, thereby bridging the gap between financial services and corporate clients. By drawing on a range of data sources and applying machine learning techniques, Hokodo is able to manage risks effectively and create sustainable value for the whole supply chain. Hokodo is a Managing General Agent which operates as an Appointed Representative of Worry + Peace, part of Innovative Risk Limited.

Louis Carbonnier, Co-Founder and Co-CEO & Richard Thornton, Co-Founder and Co-CEO had been working in embedded finance for several years together, helping major banks and insurance companies to sell financial services at the point of need, before Louis joined the world’s leading provider of trade credit insurance.

Once settled in this new role, Louis quickly came to understand the two major shortcomings of trade credit insurance.

Firstly, due to its complexity, only large corporations with sophisticated finance departments are able to access invoice protection. Paradoxically, the SMEs who most need protection against bad debt are not able to benefit from it. Secondly, trade credit insurance cannot keep pace with the world of e-commerce. That’s when the idea of a B2B Buy Now, Pay Later solution first occurred to Louis.

As Louis got more excited about the opportunity, he was joined by his old friend Sami Ben Hatit Co-Founder and CTO who began building some prototype BNPL APIs. Then he had a beer with Richard who had also been grappling with the red tape of corporate life. At first Richard didn’t believe that a venture as significant and obvious as B2B BNPL hadn’t already begun elsewhere, but after many days of trawling Google the duo concluded that it had not yet been invented. With Sami on board, the idea to build Hokodo was born.

The Future of B2B Payments: Buy Now, Pay Later

In an article by Louis, Buy Now, Pay Later, (BNPL), is a hugely popular payment method  among consumers and has become an established and expected part of the online retail experience. The expansion of BNPL has been driven in recent years by the emergence of fintechs providing accessible digital payment systems.

Precedence Research estimates the Buy Now, Pay Later industry will be worth more than $3 trillion by 2030, despite the challenges Klarna and its B2C BNPL peers have faced. It’s clear BNPL for consumers is here to stay, even if some level of consolidation is to be expected in the coming years. But how can this successful model be applied to business-to-business (B2B) trade?

Throughout the history of business commerce, companies have made their commercial transactions using trade credit. Today, annual sales on B2B trade credit amount to an impressive $30 trillion. B2B BNPL is simply another name for trade credit, yet despite how well-suited it is to B2B transactions, the concept hasn’t been widely embraced.

Why has B2B fallen behind in the BNPL revolution?

BNPL has been slow to take off in the B2B space for multiple reasons. Firstly, it could be a question of reputation, as some BNPL providers in the B2C space, such as Klarna, have come under significant scrutiny. Buy Now, Pay Later providers have been criticised for encouraging consumers to spend more money than they can afford, under terms they will find challenging to meet. These reputational issues may have hindered the growth of BNPL in the B2B sector.

B2B BNPL is also a much more complex undertaking. As B2B purchases are usually larger and costlier, the credit risk is higher and the chance of fraud increases. This makes online lending more difficult to implement for B2B.

Some sellers have turned to issuing digital credit from their own accounts – a practice leaving them open to significant risk. While traditional financial partners haven’t developed a digital trade credit solution, fintech companies have stepped in to plug the gap.

How is B2B BNPL different?

While B2B BNPL and B2C BNPL both result in the ability to defer payment for the buyer, the solutions differ in two main ways.

Business customers are less likely to be persuaded to overspend than consumers. To that end, it is much less likely that business customers will be exploited or overextend themselves.

The second difference is that B2B transactions are often more complicated. The purchasing process is longer and requires multiple discussions with stakeholders and decision-makers. Credit checks are also more convoluted. Credit analysts are needed to assess risk while Credit Underwriters make informed decisions, highlighting the need for the streamlined process an external payments solution provides.

The evolution of the B2B BNPL market

Credit terms for B2B payments are necessary for the current climate. When the economy is weak, and growth could slow, they offer a new way for businesses to avoid stagnation.

However, right now, there are very few credit options for online B2B sales. Recent research has highlighted that just 75% of B2B marketplaces allow payment through their platforms, and only 21% offer the option to pay using BNPL. Of these, 38% use an internal solution, which leads to large risk for small businesses. The upshot of this is a checkout process that hasn’t been optimised, doesn’t support credit terms and has a lack of scalability for providers.

In the past couple of years, a small group of challengers disrupting the way B2B credit payments are being made have entered the market. Third-party suppliers like Hokodo are providing embedded financing solutions for buyers and sellers. Buyers benefit from seamless payment terms to suit their needs and sellers are free from the concern of bad debt and the complexity of managing deferred digital payments.

Hokodo reported that in 2022, 41% of SMB owners actively sought suppliers offering credit terms, while a quarter of firms indicated that access to credit would be crucial to their survival in the next twelve months. With the rising cost of living crisis, fuel prices increasing swiftly, and uncertainty coming from many sources, SME owners will find B2B BNPL providers vital to growth, allowing them to invest in and develop their business.

Hokodo provides BNPL plug in for Shopify merchants

Hokodo recently announced a new plug-in for multinational e-commerce platform Shopify. This integration will enable B2B merchants with a Shopify webstore to offer instant credit terms to their limited company and sole trader buyers, while getting paid upfront and remaining protected from the risk of non-payment and fraud.

This integration is the first of its kind, positioning Hokodo as the only viable choice for Shopify’s B2B merchants who want to offer customers the ability to defer payment by up to 60 days. The plug-in is available to Shopify merchants operating in the UK, France, Spain, Belgium and the Netherlands.

“Our new Shopify integration has been designed with the merchant experience in mind, and can be installed in just a few steps with no development work required,” says Sami Ben Hatit, Hokodo’s co-founder and CTO. “This will be welcome news to SME merchants who don’t have the technology resources to spare for a several weeks long integration.”

Sellers who offer Hokodo’s deferred payment solution at the checkout have seen an uplift of 40% in conversion rate and a 30% increase in basket size. Meanwhile, business customers benefit from the opportunity to ‘buy now, pay later’ on their purchases, ultimately promoting healthier cash flow for both parties.

How it works

  • A Shopify merchant instals Hokodo’s plug-in to make credit terms available to their business customers.
  • The customer visits the Shopify store of the merchant.
  • At the checkout they choose to pay later.
  • Hokodo’s bespoke APIs run real-time eligibility checks on the buyer’s credit score and fraud risk.
  • The buyer selects their preferred payment terms and settlement method (credit card, direct debit, bank transfer etc.), and confirms their order.

The customer pays Hokodo back in line with their payment terms, while the merchant receives up front payment when delivery of the goods is confirmed. Hokodo handles the collections process, and thanks to backing from Lloyd’s of London, merchants are always protected against non-payments.

Funding & Growth

Hokodo has raised €1.9M in seed funding. Hokodo’s Seed round was led by Anthemis, Europe’s leading VC focused on Fintech and Insurtech investments.

Hokodo transforms traditional business insurance into a set of digital products delivered via APIs on partner platforms that small businesses already use for their day-to-day activities. Hokodo’s launch product is an invoice protection solution, insuring small and medium sized business owners against the risk that their customers will fail to pay an invoice when it falls due.

Richard Thornton, one of Hokodo’s founders stated: “Late payment of invoices is one of the leading causes of small business failure across Europe. In the UK, the Federation for Small Business estimates that about 30% of insolvencies are caused by the non-payment or late payment of receivables. The traditional insurance industry has commercial products to address this problem, however those products are not available to small and medium sized businesses.”

Hokodo’s insurance solutions will be delivered via APIs which can easily be integrated into accounting platforms, online marketplaces, and other platforms that business owners use on a daily basis. In this way, the platforms can embed insurance products into their existing customer journey when the need is front-of-mind, increasing the conversion rate exponentially. Hokodo’s scalable and highly automated pricing, underwriting and administration platform enables even very small businesses to be profitably served, helping to address severe under-insurance in this segment of the market.

Ruth Foxe-Blader, a Director at Anthemis said “Traditional FS providers cannot fully service online marketplaces, accounting platforms and other SME-focused technology businesses. In Hokodo we have found a team that really understands how to bridge the gap between insurance and technology. In our view, Hokodo’s robust, compliant tech stack and simple APIs represent a great idea whose time has come.”

While Hokodo is launching with an Invoice Protection solution, the team’s longer term ambition to close the small business insurance and financing gap goes much further. “When two businesses trade with each other, they are exposed to all sorts of risk — goods in transit; professional liability; liquidity; or performance risks — and Hokodo plans to help mitigate all those risks through Insurance-as-a-Service solutions.” said Hokodo co-founder, Louis Carbonnier.

“We are really thrilled to be partnering with Anthemis who are specialised in financial services and insurance. This fundraise will enable us to expand the already incredible team of data scientists, tech gurus and finance experts as well as continue development of our tech-stack, build out additional APIs and launch additional insurance products.” says Louis Carbonnier, co-founder at Hokodo. “Following our announcement last month of our underwriting partnership with SCOR Global P&C’s Channel syndicate, this fundraising round leaves us perfectly positioned to execute on our vision.”

Hokodo is part of Worry+Peace’s incubation network and has partnered with Centrifuge — an open, decentralised operating system to connect the financial supply chain.

"Hokodo transforms traditional business insurance into a set of digital products delivered via APIs on partner platforms that small businesses already use for their day-to-day activities. "

Louis Carbonnier

Co-founder & Co-CEO

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