Technology provider iVendi is to release a product designed to allow non-Financial Conduct Authority (FCA) authorised dealers to provide their used car customers with a motor finance option.
Speaking to Motor Finance, James Tew, chief executive officer at iVendi said the company had been working with a lender on the concept for 18 months, having seen the FCA consultation papers and the amount of regulation that dealers were going to need to comply with.
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Under FCA rules, dealers wishing to sell finance will need to be regulated. Due to the quantity of regulation, however, a number of smaller dealers have opted to not seek FCA authorisation.
In these case, says Tew, if a customer wanted to use finance to buy a car, the best a dealer could say is ‘we don’t offer finance ourselves. We work with X company, they can provide all the quotations for you.’
Tew said: "It’s very disruptive in the sale process because a customer might ask how much something is a month, and the dealer won’t be able to say anything, because they won’t be authorised to sell finance."
Using the new iVendi product, once a total price has been agreed between a customer and a dealer, the dealer fills out a ‘post negotiated deal’ online form containing questions on vehicle information and basic customer information.
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By GlobalDataFollowing this the customer is sent an email which contains all the finance quotations on it. According to Tew, although iVendi built the tool, quotations are pulled directly from the lender, and are branded by the lender.
If the customer does not have access to their email, the dealer can provide them with a unique code, which the customer can use to gain access to the quotes from any computer.
In either situation, if the customer chooses to proceed with a quote, because the vehicles details have already been entered, they’re taken to a product suitability section to enter personal details and circumstances. Assuming they’re suitable and are happy to proceed, they are able to formally apply for the finance, and will receive an instant decision from the lender.
If they’re approved, the lender can then send all the documentation out to the customer for them to fill in. "But in terms of getting all the decision sorted out, and all the data captured, and all of the suitability and product information, that’s all managed online," said Tew.
As the dealer is removed from the selling of the finance, he or she is only acting as an introducer.
Tew said: "Because you’re bringing in all the suitability aspects of it, it’s automating all the regulation. It’s enabling the customer to self-serve throughout the process. You can do it in the showroom, at home or in the dealership. It in essence enables the finance process to happen.
"It is arguably slightly more disjointed compared to the normal way of doing it. But from a dealer’s perspective, it’s removed the entire regulatory burden and the costs of regulation."
Regulatory burden
Tew said he saw the product as one of the first significant digital changes to come to the market as a result of the FCA.
He said: "Every time you drive past an independent dealer, they’re under the same regulatory control as all the major banks, and have got to have the same complaints procedures, compliance monitoring, training, and so on.
"These dealers won’t all be able to handle the regulatory burden" said Tew, who added: "A dealer will get fined by the FCA. It’s not if, it’s when. And it’ll be done to send a message out, so probably a well-known name. And once that’s happened, people will start saying ‘jeez, they got fined’.
I can imagine a lot of dealers might not even know what they’ve been fined for or not understanding it, because getting all the processes in place is onerous. I mean it’s onerous for companies that really embrace compliance. We know this because we’re going through our authorisation process."
Tew said that the new system was designed to mitigate this and remove the burden, comparing the dealers role in the finance offering under the new product to that of a vet handing out a pet insurance brochure – the dealer is now acting as an introducer, instead of a seller.
While the system does tie the dealer to a lender, the dealers will receive payment for the service. Tew distinguishes the payment model, though "you’re not getting paid commission for the sale, but you’re getting paid money for marketing my product for me."
Behind the scenes, iVendi audit everything digitally, and Tew said the whole concept has been looked at and approved by lawyers. "The lawyers got it straight away, and saw that as long as the customer has control, there is a nice handover in the process, the dealer only does so much."
In a statement, Tew said: "It creates an infrastructure for dealers who are choosing not to go down the FCA route to still offer a customer a finance option, even if they are effectively several steps removed from the process itself.
"There has naturally been a huge amount of interest in the product and we expect the first dealers to go live with it in a matter of weeks."
