Are AI and blockchain the future of trade credit?

By David Beach | 19 October 2017

bobsguide spoke to Jérôme Pezé, CEO of Tinubu Square, the SaaS trade credit firm. Jérôme talks us through the trade credit landscape


How did Tinubu Square launch?

I started my career in the Paribas Group in trade finance. I then moved to Arthur Andersen, the audit firm, where I worked as a CTA. After that, I joined Renault Group where I headed the international department. Whilst there I had the chance to study at Stanford Graduate School of Business, and was soon recruited to join the French company SFAC (now Euler-Hermes).

My responsibility at Euler-Hermes was to discover how technology could play a major role in the evolution of the industry, to better adapt ourselves to the market and generate opportunities. I wanted to spin off and work in a different way, but that couldn’t happen so I started my own company. There was a need for such a company in the trade finance industry that could spearhead the evolution of trade technology and that’s how Tinubu Square came to be. I founded the company with Olivier Placca.

From the beginning, we wanted to position ourselves as the technology company; driving innovation and digitisation in the trade finance industry. We spent a few preliminary years dedicated to research and development and achieved what we wanted from day one - to be a cloud platform where we have our own system which is governed by the client.

What challenges do you hear from your industry and how does Tinubu Square provide solutions to them?

There are a number of challenges for credit insurers. The first challenge is to be capable of providing a seamless process which is responsive and integrated for their clients’ management systems and to provide a more immediate answer to their clients with limited human intervention. Secondly, there is a challenge to better assess the risk and provide more capacity to the clients. Third, credit insurers need the ability to implement a system that enables their clients to satisfy the growing requirements for compliance and transparency.

Another challenge for most credit insurers is to constantly re-engineer their architecture and systems to remain an efficient organisation in the market. We situate ourselves as the provider of this reengineering process. As a final challenge, the industry is growing and that means there are new emerging companies being set up globally. To set up shop they need a system of controls and risk assessments and this is where the Tinubu Square SaaS platform, which is a turnkey solution, enables new players to start with the highest standard of technology in the industry, quickly implemented and at a variable cost, not at a “big” fixed cost.

What advantage is there buying from an external vendor over in-house development?

One of the benefits of using external systems is that it enables those clients to be more intelligent. They can open up APIs to information providers which helps resolve stability and complexity issues. This means that they control strategy decision and risk and, by choosing the best external information provider, they can optimise that information through risk analysis. This is something that credit insurers are lacking, or at least, to do it would drastically change their internal architecture.

What technology is used by Tinubu Square?

So far, we are the only company to provide the full spectrum of tools required by insurance companies in a private SaaS mode - that is, we can provide our services internally whilst still improving our platform externally. Every three weeks we issue a new release of our software, so it’s permanently improving with wider scope for functionality and flexibility; that’s the beauty of SaaS.

In practice, this means that a client looking to launch a product, which is a difficult challenge in the insurance industry, can set their own parameters using our SaaS. In other words, it’s one thing to launch the product but you need to understand and see the transaction flow, i.e how it will impact your account. If you can set your own parameters you can immediately see this. For instance, one of our clients, QBE, began operating in a new country and it took them less than three months to launch their new product.

Tinubu Square has recently received €53m in investment. In which areas do you intend to invest it in the future?

We see two key evolutions and a potential third opportunity.

1. The credit insurance industry is globalising. Be that from the evolution of the premium to 5-6%, or the newly emerging volume of credit insurance companies, or even new regional markets looking to support the development of regional industry, we can provide solutions for these new players to achieve parity with existing players.

2. Credit insurance is not an isolated industry but part of a larger eco-system. The interaction between the insurers and the banks is growing. Notably more and more banks have perceived that to provide adequate funding and optimise the cost of their equity they have the option of transferring the risk on debtors to insurers. The importance of insurers and reinsurers to receive risks and to cover those risks is huge. The banks that are facing issues with their solvency ratio need to have a detailed understanding of the risk to the buyers, and the option of transferring this risk to insurers or reinsurers. That requires a need for a system that enables them to better choose the carrier of risk. We provide a seamless solution for banks in trade finance for them to manage and transfer this risk to insurers and reinsurers.

3. The third potential opportunity, is the use of data analytics and blockchain in trade finance. Now more than ever trade financiers have at their disposal the tools for accurate data which is available to them in a seamless process. If you look at any transaction in trade, including insurance, it is more digitised and certified than ever before. There is potential here for blockchain to do both functions and play a key role in the total digitisation of trade finance transactions, as well as ensuring the proper handling of risk. We have developed data analytics to profile and build models to assess these risks, but to fully integrate with blockchain and also further the potential of accurate data via AI will require investment.