Digitisation has swept through the business world, generating better results and feedback from those who have made the switch. The motor finance industry may have been a little slow to take advantage, but it is clear from the speakers and panel discussions at this year’s Motor Finance Conference in Munich that the market is ready to embrace the online world. Chris Lemmon reports.
Time for change is definitely now; our industry will never be the same again,” asserted Georg Bauer, co-founder and chair of digital car-buying startup FAIR.
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Despite the somewhat apocalyptic tone, Bauer assured the audience that the inevitable change in the car-buying process is a change for good – improving and simplifying processes for the benefit of the customer.
Bauer’s talk explored the new-age expectations of the customers in the motor market, and how companies must adapt to meet those needs.
“A recent survey in the US revealed that 84% of Americans do not like going to dealerships, while 70% of millennials now do their shopping on their mobile,” he noted. “Change is necessary, and it is being driven by consumers who simply want a new way to shop for cars.”
Giacomo Carelli, chief executive and general manager at FCA Bank, added that 86% of car buyers already start their purchase journey online, while three-quarters of customers would consider purchasing a car online, however the infrastructure to do so is not currently there.
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By GlobalData“Infrastructure helps to drive the digital switch,” he said. “It is not easy when it comes to implementation, but habits need to change to meet customer expectations.”
Subscription Generation
One such innovation that could meet the changing needs of the customer base is subscription car services. Various speakers throughout the day earmarked subscription services as the future of the motor finance industry.
Some €350bn (£311bn) was spent on subscription services in Europe last year, according to Charles-Alexandre Gamba, partner at ITDS Group. In his speech, Gamba boldly estimated that 40% of the mobility market will move to subscription-based models by 2030.
Brendan Gleeson, group chief executive at White Clarke Group, was less optimistic in the growth of such schemes – 10% of vehicles by 2025 – but agreed that its evolution will drive a fundamental shift in the market.
“Companies now feel like they have no choice but to get into the subscription model,” Gleeson explained, “because they are afraid of losing their customers, and they must protect their customer base.
“OEMs are now trying to position themselves as mobility-as-a-service providers, with subscription models being the first significant stepping stone in that direction. They will also have to consider what initial services can be shoved down the subscription pipe because the car-only model does not make much money right now.”
Gleeson warned that the birth of subscription car services could also draw the attention of e-commerce giants such as Amazon – presenting companies already active in the industry with a huge competitive challenge. “If Amazon does decide to join the subscription space, which it might, then I think it will win hands down.”
Gamba explained why Amazon has the advantage in the space, as the company’s focus is based entirely on consumer satisfaction. “We are in the age of the instant gratification generation. Everyone wants everything now: if you want to watch a movie, there’s Netflix; if you want to get somewhere, there’s Uber; if you want something delivered, there’s Amazon. However if you want to get finance for your vehicle, it takes five days or more.”
ITDS Group conducted a study of the top 15 automotive finance companies from the top six countries in Europe, finding that just 8% offer online processes for customers to finance their vehicle. In addition, just 20% of surveyed firms have a mobile application.
“Be where your customers are,” Gamba warned. “They are online, they are on mobile and they are on social media. If you are not there to meet their expectations, they will take their business elsewhere.”
The Importance of Data
The importance of big data and analytics was also a hot topic at this year’s conference, with many speakers quick to point out the various benefits that implementation could have for a company.
One such benefit is increased accuracy in the used car valuation space, which has enjoyed recent success as a result of ongoing uncertainty in the new car market.
“The industry needs to move forward in the way it looks at information,” argued Rupert Pontin, director of valuations at Cazana, who believes that traditional methods of valuation are falling short of the new industry standard. “Never has the correct retail value of a vehicle been as important as it is today, but the industry has not moved forward.
“Customers now are sitting on their mobile phones or laptops, constantly looking at the marketplace as a whole, not through the newspaper like 10 years ago. They are looking at everything, and if you do not work with the very latest data, then you will find that the customer is ahead of where you are.”
Pontin explained that recent developments in technology have enabled new capabilities in data querying. “Real-time data will now help you to understand very quickly and clearly what your level of risk is like, and to value vehicles much faster.”
Advancements in big data analytics have also equipped service providers with an improved overview of their customer base. Speakers throughout the day discussed how data can help companies stay ahead of the curve when it comes to customer trends and behaviours.
In the afternoon panel session, Alfa’s Andrew Flegg and fromcash2car’s Heidi Bauer discussed the implementation of such systems. Bauer argued that AI algorithms have been around for a long time, but it’s only now that we have the data to utilise them effectively.
“There are a range of different ways this can benefit a dealer, such as credit decisioning and also helping customers to find the right solution they want and need,” he said.
Flegg agreed on the advantages of data analysis, adding that businesses can now recognise “when customers are going into delinquency or facing financial hardship, based on the patterns of behaviour we can see across the entire customer base”.
With such capabilities, businesses will be able to grow their relationship with the consumer, helping to boost customer retention rates.
Bernhard Cziesla, director of Toyota Kreditbank, stated that it is important to keep customer data up to date to ensure they are getting the service they want.
“Companies must replenish the data to influence the customer’s life positively,” he said. “They don’t want an online service; they want a whole range of mobility services. They want a comprehensive service for all of their needs.”
Aligning Stars
The conference in Munich offered attendees an insight into what the motor finance market will look like in the coming years.
Digital transformation was the key theme of the day, with talks throughout the event stressing the need for technology investment to meet changing consumer demands.
New financial models were discussed, while panels seemed convinced that we are heading into an age of disownership. It is now up to players in the market to react to trends accordingly and ensure that their offerings meet these new expectations.
The roles of OEMs and dealers look set to see the most drastic changes in the future, as new digitisation and disownership trends demand a rethink of traditional practices.
“Stars are aligning in the motor finance industry as they were a few years back in the banking industry,” concluded Quotevine’s Rebecca Duckworth. “It’s a very exciting time for the market.”
