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The Connector Podcast - DFS Digital Finance Summit - From Credit Risk to Digital Trade: AREA42's Evolution
Lode from AREA42 explains how this innovation vehicle within Credendo is transforming B2B trade finance by offering flexible working capital solutions that make digital trade more accessible and user-friendly.
• AREA42 is the innovation arm of Credendo, a credit insurance company with over 100 years of history
• Credit insurance protects sellers when buyers don't pay invoices, unlike factoring, which provides immediate financing
• Digital B2B marketplaces often require upfront payment, creating friction compared to traditional trade credit terms
• AREA42 evolved from offering complex credit insurance to providing streamlined working capital solutions
• Their approach keeps user experience simple while handling risk assessment complexity behind the scenes
• Partnerships with payment service providers help keep costs lower than traditional financial institutions
• AREA42 offers API integration and white-labeling options for seamless incorporation into e-commerce platforms
• The biggest learning was shifting from a solution-first to a problem-first innovation approach
• Balancing corporate stability with startup agility remains a key challenge and opportunity
"Any company in the world, especially in the European Economic Area, we can help you. We can help you with any working capital problem that you have. Come to us, and we will help you."
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Koen Vanderhoydonk
koen.vanderhoydonk@jointheconnector.com
#FinTech #RegTech #Scaleup #WealthTech
Speaker 1: 0:01
Welcome to the Connector podcast, an ongoing conversation connecting FinTechs, banks, and regulators worldwide. Join CEO and founder, Koen Vanderhoydonk, as you learn more about the latest available trends and solutions in the markets.
Speaker 2: 0:19
Welcome to another podcast with the Connector in collaboration with Fintech Belgium. And, today I've got with me Lode. Lode from AREA42. [Speaker 3: Yes.] Who are you and what do you do?
Speaker 3: 0:32
Well, I'm the Head of AREA42 and AREA42 is the innovation vehicle of Credendo. And Credendo is a credit insurance company. And a credit insurance company, what does it do? It insures companies who do trade with other companies, and when they do trade, then they typically issue an invoice. That invoice has to be paid within 30 or 60 or 90 days. So that means you have a risk that the buyer does not pay. Well, we insure against that risk.
Speaker 2: 1:02
So I'm going to ask you a question which you already know that I'm going to ask. So is it factoring?
Speaker 3: 1:07
No, it is not. Factoring is when a company is selling something to another company and it wants to be early financed for that. So the moment that they start producing or the moment that they issue the invoice, they immediately receive the money, and then it's the factoring company that receives the money from the buyer. That's not what we do. What we do is we issue an insurance and in case that the buyer does not pay to the seller, then at that moment, and only after non-payment, we pay the seller and then we try to get the money back from the buyer.
Speaker 2: 1:46
And that's the business where Credendo is in. [Speaker 3: Yes.] So, where exactly, because you said Area 54. I've been to Las Vegas last week, so I've been to Area 52 (laughs). 51, actually (laughs) [Speaker 3: 51, yes!] So, AREA42. And, how does it actually work together with Credendo?
Speaker 3: 2:05
Then we go back to the origin of AREA42. I started with AREA42 in 2018 basically. It was…
Speaker 2: 2:18
It’s a long time ago for FinTechs.
Speaker 3: 2:20
Yes, it's a very long time ago, but the first two to three years was really exploring the market. And what did Credendo see? That is, Credendo exists for more than 100 years and we saw that the digital world is becoming more and more important, even in B2B trade. And, in digital B2B trade, what we noticed was that a lot of the transactions are done cash-based. Cash-based, that means you order something, you pay immediately, even before the invoice is there, or maybe the invoice is already there, but definitely the goods nor the services are delivered yet. So, you pay before delivery. That is something that businesses don't like, because in the non-digital world, let's say the analog world or the normal world, companies are used to paying days, many days, after issuing the invoice, and now they have to pay before, which is not normal. And, so that's a big impediment for those digital marketplaces, those digital e-commerce shops. And, we wanted to provide a solution for that, and in the beginning we thought we will just offer credit insurance on those platforms and it's done. [Speaker 2: It was not that easy.] No, it was not! Actually, a credit insurance process is quite a complicated process, and when you try to simplify it to the bare essentials, either you come to a credit insurance that is so standardized, so simplistic, that almost none of the companies are interested in it because the scope is not big enough anymore. Or you go the other way and you say, ‘You know what? We will still offer a somewhat more complex product. But, we will do only half of the process.’ But that leads then to abnormal risks for us.
Speaker 2: 4:14
Yeah, you need two to tango.
Speaker 3: 4:16
Yes! And, so if the risk is too high, then we constantly make a loss, we go bankrupt, and it's also finished. That cannot be the purpose. So you have to find a balance there and we didn't find it. We talked to, yeah, we looked to a lot of competitors and they also didn't find it. And so that's when, in AREA42, we started to realize, ‘Yeah, okay, if we can't provide the credit insurance, then what if we provide funding?’ So we pay instead of the buyer, and either the buyer gets a loan or the seller gets a loan, so that's just who will pay the interest rate. And then we noticed, ‘Oh yeah, but that's actually a much simpler process.’ And that can be easily incorporated in an e-commerce process, in a digital market process. Those places, they don't have to change their processes. They just have to call a different API, but they can keep that process.
Speaker 2: 5:21
But are we not getting closer to factoring then again?
Speaker 3: 5:24
Then we are getting close to factoring again. And so what we now offer are funding solutions. We call them working capital solutions, but that is very close or exactly equal to factoring, and in the back we still have a credit insurance. But we do not expose the complexity of the credit insurance to our customers. It is something that we incorporate in our processes so that our real customers – namely e-commerce, digital marketplaces, buyers, sellers – so that they can have still a user experience that is really, really nice and the complexity of something that we solve in our back office.
Speaker 2: 6:08
Do you see other sorts of technologies that come across in solving this problem?
Speaker 3: 6:16
We see many approaches and it’s… a lot of those approaches are based on cooperations with credit card companies, cooperations with traditional banks, cooperations with traditional credit insurers. We are doing it a little bit different and because of that we are more flexible. But most of all, we can guarantee that the user experience as defined by the e-commerce, as defined by the digital marketplace, that they can keep the user experience that they want. So that means they just have to call some APIs. We can be white labeled. We can show our label – whatever the e-commerce, whatever the marketplace wants, we can offer it.
And that is where we differentiate ourselves. And on top of that, we do that in close cooperation with PSPs, payment service providers, and that helps us also to be cost efficient. So the cost that we charge to our customers is lower because of that. Why? Because we have a good cooperation with PSPs, who are typically also a much better cost alternative than some more of the traditional players. And, in that way, we can be cost efficient to our customers and still maintain that good user experience.
Speaker 2: 7:50
I’d like to take a little bit of a turn, because it's kind of interesting that AREA42 has been incubated from an incumbent, if I may say, as somebody that's in the business for a long time. So, what have been your challenges as from an intrapreneur to an entrepreneur? Or, maybe you're still an intrapreneur?
Speaker 3: 8:08
I'm still an intrapreneur. And as a lot of people told me when I started, ‘Lode, you're crazy, that is impossible.’ But the moment that people tell me something is impossible, but I think it is possible, that's for me…
Speaker 2: 8:25
It’s for me itchy.
Speaker 3: 8:27
Yes! That's the challenge, then, for me to prove them wrong. Now, if they say it's impossible and I also think it's impossible then I don't start. But here I really had… [Speaker 2: Smart.] … but, here I really had the feeling, ‘Why would this be impossible?’ And it is possible. And I have to say, Credendo, they really have a long-term vision. That helps a lot. Credendo also had the insight of, ‘Yeah, but the digital world in B2B – that's going to be very important.’ Are they unique in that? No, but they were willing to invest in that and to see, ‘Can we find a solution?’ Because we see with our competitors, they are also trying and some are more successful than others. And, yeah, we are competing there, I know. But, it's nice to see, to have the backing of Credendo as a corporate. The disadvantage sometimes is, yes, you are working with a corporate and they have very well-established processes. Because of that, they are efficient, I have to say. But, they do not always have the dynamics that a typical startup has. For example, this morning I was talking to someone who started a startup. Yeah, they don't have to take anything into account. They just focus on what they want to do and they don't have to care about, ‘Ah, I have to go to this committee or that committee to get an approval.’ In the case of AREA42, we don't have that a lot, but we still have it a bit. So, it's finding that balance between the strong backing of a corporate but still keeping the dynamics of a startup, and that's not always easy.
Speaker 2: 10:17
And do you feel that you have changed as a person since you're more on the startup side now?
Speaker 3: 10:24
Honestly, no. I don't think so. I'm still the person who I was before. I’ve learned a lot of things. That is, that is correct. But, change as a person by that I, or at least I interpret that as, ‘Did your personality change?’ No, I would say probably I should have done this earlier… [Speaker 2: Interesting] …rather than six years ago. Maybe I should have done it 10 years ago, but then again, 10 years ago the problem was not that clear yet. And, why do I put it like that? Because that is something that we learned in AREA42. We do innovation by looking for problems and then trying to come with a creative solution to solve that problem. But we didn't do that at the very start. At the very start, we thought we’re all bright, so we will just come with new solutions.
Speaker 2: 11:25
So maybe there is a learning.
Speaker 3: 11:27
That is a learning, yes! But it didn't change me as a person. But it increased my experience. And just to finish that off, you come with a solution and then you have to start looking for a problem, because otherwise nobody will buy your solution. [Speaker 2: Likely.] And we had several ideas where, if we didn't find a problem, then why on Earth did you spend the time to come up with that solution if there is no problem? And that is something that we changed quite soon, or really at the beginning of AREA42, but we did start in the wrong way. And that's where you learn. You also learn how to work with different types of people, because in a traditional financial institution – and Credendo is a financial institution – you have a typical type of people working there. And in startups, you have typically other types of people working there. But, now you have to find a combination of those two. That is really interesting. [Speaker 2: Oh, I can imagine.] I really love that.
Speaker 2: 12:39
I think it's very interesting that you shared all this with us and the audience. Lode, we’re already at the end of our podcast. Time flies when you're having fun, they say. [Speaker 3: Yes!] So what would be your number one advice for people to contact you?
Speaker 3: 12:57
Just pick up the phone and call me. [Speaker 2: That's very started, man! (laughs)] No, but I mean it. Call me, send me an email, go to LinkedIn, look up my name and contact me. Because any company in the world, and especially in the European Economic Area, we can help you. We can help you with any kind of working capital problem that you have. Come to us and we will help you.
Speaker 2: 13:26
Brilliant, so I'm sure that there will be a massive amount of people coming to you. I'm very sorry for that.
Speaker 3: 13:32
I'm very happy for that.
Speaker 2: 13:36
I understand. Well, thank you very much again. Thank you also to the audience and stay tuned for more news from the FinTech world. [Speaker 3: Thank you. Bye-bye.] Thank you. Bye-bye.
Speaker 1: 13:42
Thanks for listening to another episode of the Connector Podcast. To connect and keep up to date with all the latest, head over to www.jointheconnector.com or hit ‘Subscribe’ via your podcast streaming platform.