A new wave of technological innovations is making a splash in the leasing and finance landscape
Fuel and mileage overheads are part and parcel of every automotive operation. So much so that many dealers, OEMs and leasing companies rarely give them much thought.
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Innovation and technology are remodelling the auto finance industry, with new business models eliminating inefficiencies within the current system, while a wave of new technologies is introducing rapid change across the industry.
The key focus is data: how to keep it secure, how to monetize it, and how to use newly available data to transform products and develop seamless omnichannel experiences and services.
Disruption is far beyond any one technology, product or service. Long-established business models have been challenged and completely reinvented, with consumer preferences firmly in the driver’s seat.
Leading finance technology firm, White Clarke Group has identified four main categories main areas of focus for technology innovation: Mobile & Pay-as-you-go Car Finance, Artificial Customer Service, Cryptocurrency, Blockchain & Mobility and Cyber Wars.
Mobile & Pay-as-you-go Car Finance
Fintech start-ups are leveraging innovation to revolutionize the way in which both vehicles and auto finance are delivered, with mobility services like ride-sharing and car subscriptions gaining traction.
A 2016 report from the consulting firm McKinsey predicted that “on-demand mobility services and data-driven services” like subscriptions, ride-hailing services, and remote software upgrades could create $1.5 trillion in additional revenue for the industry in 2030. For existing players and new entrants, that is a prize worth fighting for.
And fighting they are.
Over the last few years, dealers and lenders have continued to use new technology to offer an improved user experience via online systems, and to speed up existing document and identity verification and credit checks. The challenge is now to find ways of using technology to create compelling digital propositions which appeal to an increasingly sophisticated user base.
Artificial Customer Service
Lenders have started already experimenting with using AI and machine learning to revolutionize customer service. Existing options, such as phoning an agent in a call center, or chatting online, are expensive to provide and present challenges in ensuring information is delivered and recorded so it is compliant with financial regulations.
Benji Stone, Customer Service Lead at UK start-up DigitalGenius explains: “The vision is to use AI as a layer of technology in the contact center, to help agents, to complement their work and raise the game in quality.”
While banks and insurance companies have started to use AI in these areas, with Erica, Rachel and Nuance Nina being some of the newly implemented virtual assistants; the auto finance market has been slower to take up the technology. However, the drive to adopt a customer-centric view means this is fast becoming an area of growth.
Cryptocurrency, Blockchain & Mobility
With the trend towards car usage rather than outright car ownership accelerating, manufacturers and others in the auto finance supply chain are looking to create platforms which allow users to pick and choose from a range of transport offerings to match their needs at different times.
A broad suite of mobility products and services are currently being developed for personal vehicle owners, fleet owners and cities globally, leveraging the data that comes from connected and autonomous cars as well as from mobile apps to refine services.
Other companies are looking at taking this concept further, by looking at how new technology can be used to smooth payments across multiple partners and incentivize driver behaviors.
One such example is DOVU, who are combining a mobility services platform with Blockchain – the technology behind cryptocurrencies. Drivers sign up to a “smart contract”, earning them tokens for sharing their mobility data or making small changes in their travel behavior.
Blockchain is another technology which is reshaping the automotive industry, offering a way to manage supply chain interactions and to share data without requiring substantial additional investment in infrastructure. Auto finance lenders, fleet managers and dealerships will need to ensure that their systems are sufficiently flexible and agile to allow them to enter this new world.
As increasing volumes of highly sensitive and critical data move online, so do the criminals. Royce Curtin, Managing Director of Global Intelligence at Barclays, warns of the rise of “Crime-as-a-Service”, where encrypted communications via the Dark Web are used to find insider information and hackers who are prepared to launch an assault on some of the world’s biggest banks and retailers.
“Companies suffer an average 1.5% share price decline after cyber-attacks are made public, with some drops of up to 15%. Financial services experience the biggest declines and the highest regulatory fines,” Curtin said.
This growth in cybercrime highlights the importance of adequate training at all levels of business to prevent simple security lapses that can often have substantial, and even crippling consequences to consumer trust.
Get on the right track
Businesses are under intense pressure to gain and protect market share as new players prove nimble, sophisticated and well-funded for shaping the future of automotive finance.
White Clarke Group believes that, with the right technology and partners, even traditional business models are able to close the gap. More aggressive outlooks suggest that traditional players could even become the disrupters themselves, if, and only if, they accept that evolution requires them to look critically at all aspects of how they operate. The winners will be those who are able to build on their existing strengths, think bigger and adapt to the current pace of innovation.