Leading asset finance industry figures provide their view on the future developments that lie ahead for the sector. Miles Rogerson reports.
Customer engagement will be a vital factor that drives success in the asset finance industry this year.
Johnny Clayton, chief executive officer at Oodle Car Finance (pictured above), explained: “I think we’re going to continue to see customers driving the needs and demands for change and we’re going to see successes from businesses that engage with shoppers in a way that is inspiring and relevant to them individually, whilst putting forward the best products to induce a sale.
“On the car dealer front, the path to purchase is fundamentally shifting, with the online buying process continuing to trend. Selling is becoming less about the car and more about the customer experience, and with so much choice available, including online finance options, subscriptions schemes, personal contract hire, ride hailing apps and the launch of new marketplaces such as Facebook, Carnext and HeyCar, dealers have a lot to compete with.
“To remain relevant to the latest wave of customers and reach new and younger demographics, dealers are having to significantly up their digital game, and re-think how they respond to provide customer experiences seen in other retail markets.”
Comfort in sight
Clayton concluded: “This year we expect to see technology significantly personalising the buying process – by way of smoother onboarding apps, seamless purchase journeys, home delivery logistics, flexible return policies and better online imagery and information on the car - to drive comfort in sight unseen purchasing.”
This resonates quite clearly with the views of iVendi chief executive officer James Tew, who forecast that using more advanced technology to drive increased and more productive customer engagement will be key for dealers in 2020.
Despite the varying claims that the majority of customers opt to choose, finance and buy a car in the showroom or online, Tew stressed that their initial interest will almost certainly have been digital, and that it is therefore vital to make the process of first interest as efficient and effective as possible.
He added: “In a lot of ways this is the most dated area of online motor retail, with many dealers relying on traditional search and some form of e-mail to drive communication but investing in newer and better technology can produce much better results. The fact is that, heading into 2020, there is technology available that helps customers identify the right vehicle faster and dealers to create a much greater level of engagement earlier on.”
The good news is that people still want to own cars, says Clayton.
He added: “But what they’re now looking for is greater transparency, convenience and customer centricity - options that afford them the freedom to change that ownership more often and with increased flexibility.
“We need to keep up with their needs through better finance and rental options and flexible contracts to fill the gap between sharing and full ownership, and this can only be achieved with a better understanding of our customers, and providing the seamless purchasing seen in other markets.
“It’s worthy of note that Dealers are also having to now compete with a new wave of market entrants (such as Cazoo) whose business model sees the removal of car dealerships from the equation completely. Great news for the consumer perhaps, but it presents a genuine threat for the thousands of car dealerships across the country. With these new market entrants now live, the need for dealerships to get up to speed is paramount. We’re all about disrupting the UK used-car market, but we very much feel that there’s an important place for dealerships within that, even in this digital age. To be able to leverage their knowledge and expertise for the customer is invaluable. Dealerships realise that there’s no room or time for complacency though and that 2020 is the year to shake up their digital strategies and work with finance partners to ensure they are present at the beginning of the buying chain, not just the end.”
Artificial intelligence and machine learning
Digging deeper into the theme of technology and how it is expected to impact the auto finance market, Marieke Saeij, chief executive officer at Onguard, said: “Developments in artificial intelligence (AI), machine learning (ML) and robotic process automation (RPA) mean that routine administrative tasks will be automated, and while people will still be needed, it won’t be for those roles that machines can do perfectly.
“However, this evolution to automation will drive a higher importance for personal interaction, driven by customer demand. 2020 will be the year that businesses gain the confidence to take the leap and adopt AI, ML and RPA and as a result, we will see these technologies become a lot more pervasive.
“There is currently uncertainty around new technologies due to the threat of job losses, but these fears are misguided as new roles will materialise to work alongside the tech in order to make more intelligent, informed decisions. With more data available, the analysis of big data will offer greater ability to monitor the risk of investment capital, allowing businesses to take more calculated risks thus increase the number of clients they are able to take on.”
Equipment finance sector prepares itself for change
IT equipment finance grew 3% last year compared to 2018, with final quarter demand jumping 25% year-on-year, according to figures from the Finance and Leasing Association.
To offer some further insight into how the equipment finance sector is thought to develop in the coming months, Patrick Jelly, commercial director at Aldermore Asset Finance, explained: “Stability has been missing from the political and economic landscape for some time and the growing sense of certainty will hopefully provide SMEs with the confidence they need in order to make financing decisions to help them build and grow.”
Small business supply chains are complex in nature, and Jelly went on to explain how one small change at a single supplier can have a ripple effect. Research from Aldermore found that more than 59% of small business owners did not fully understand all of the components in their supply chain and over a third have undertaken audits to better understand them. Further research found that almost 50% of UK SMEs do not have a contingency plan in place should their largest supplier fail, and one in 10 believe they would not survive as a result.
“Understanding the supply chain can help solidify business models for SMEs,” he continued, “and help provide better clarity on where they can grow, through the investment in new business assets or an increase in investment across the board.”
In terms of upcoming challenges for the equipment finance sector, Jelly added: “The hot topic in the industry at the moment is the FCA Motor Finance Review. Whilst the main focus is on the consumer car market, there will no doubt be consideration of a read across into the commercial lending market to standardise commission models for introducers.
“In the short term the FCA review may pose challenges as the industry works to interpret how to implement the rules. In the long term this change provides opportunities to standardise the market and provide a more transparent process for SMEs.
“We are actively preparing ourselves for the change but await guidance from the FCA when they publish the final rules in the coming months. We will be working closely with our broker partners to understand how we will work together to comply with the FCA guidance.”