It feels like the end of the year is approaching at breakneck speed. Here in Chicago, Illinois, the days are getting shorter, and the temperatures are dropping. Thanksgiving is not far off. All of which makes me think it’s a good time to take stock before we head into the holidays.

I’ve covered a lot of ground on the blog for auto financiers to think about this year—from the use of predictive analytics to meet the challenges of non-performing loans and a look at why digital transformation is so difficult in this industry, to how auto lenders can transform customer and dealer experiences and use servitization finance models to meet changing expectations. I also discussed the opportunities presented by intelligent data and digital twins.

Wanting to pull these and other threads together, my European colleagues Andreas Staudinger, Florian Lautenbach, Lenard Nadidai and Stefanie Engelmann recently studied top trends and interviewed industry experts. Based on their research, they have presented a view of the future of the automotive finance industry and how lenders can meet customers’ expectations of tomorrow (see the report: The Future of Automotive Finance).

Let’s take a look at what they suggest.

Five core competencies for auto finance companies to develop now

When we think about the future of auto financing, it’s obvious that change is coming. Consumers are savvier than they were in the past. They’ve done their research before they arrive at the dealer, and some have even compared vehicle pricing using online portals. But the way they consume transportation and automotive services is also likely to change. For instance, my colleagues expect to see a rise in on-demand use of vehicles (beyond car sharing) and an uptick in long-term rental or subscription models.

To meet these new expectations, they suggest auto lenders and lessors increase their competency in five areas:

  1. A customer-centric user experience. It’s time to enable a best-in-class digital product range and create positive curated customer experiences to increase conversion rates.
  2. Flexible contract management and agile operations. You’ll need to use new technologies to develop flexible products and services (servitization models) and accelerate speed to market with DevOps.
  3. Data-driven and intelligent business operations. It’ll be more important than ever to analyze data to create individual service offerings and evaluate channels and assets to achieve operational excellence.
  4. Customer lifecycle management optimization. Customers will expect your support over the entire product and service lifecycle. By doing this, you’ll be able to increase customer retention and boost loyalty.
  5. API-based architecture, smart sourcing and partnering models. As we talked about with servitization, customers want bundled products and services. Think about extending your customer reach through partner networks.

Three business models fit for the future

Adopting these core competencies is just one piece of the puzzle. Auto financiers that fail to move beyond current business models will struggle to keep up with their peers in the market. My colleagues suggest three new models to consider:

1. Digital champion. Under this model, you’d offer customers a completely digital end-to-end journey. This is not just about providing an outstanding digital user experience. My colleagues say it also means using “the ease of API-based integration to scale customer reach and offer operational excellence with a high degree of automation all the way to the back end.”

2. Mobility service provider. If you’re more interested in service offerings, this might be the business model for you. This model complements mobility or automotive offerings by providing services such as subscription, car-sharing and home delivery.

3. Platform provider. The third model combines a high degree of digitalization with extended service offerings. It entails integrating services from various partners while retaining ownership of the customer interface.

Did any of these resonate with you? I agree with my colleagues and really think this is a global opportunity. Staying relevant and meeting customers’ evolving expectations remain the primary focus. Now’s the time to decide which path you’ll take.

If you’d like to talk about how to develop any of these competencies or think through which business model is the best fit in your context, please don’t hesitate to reach out to me.

In the meantime, I highly recommend you read the full report: The Future of Automotive Finance.
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