Many auto and equipment finance providers are missing out on a huge opportunity—to use the massive amounts of data available to understand risk in a more nuanced way and to finetune their pricing.
I’ve been thinking a lot lately about the power of the massive datasets available today, and how auto and equipment finance companies could make better use of that data. In our latest Technology Vision, I see data as being a critical component of all the trends companies are facing. Digital-twin technologies, for example, are being broadly adopted across industries—resulting in threads of data that could soon be essential to every enterprise. In some sectors, companies are even linking digital twins to form massive networks of living models.
But what does it mean for auto and equipment financiers?
Gathering more data
Most lenders and lessors know they could unlock more value from the data they already have. But their own data is just the tip of the iceberg. There are also publicly available datasets, third-party data and now IoT data from connected vehicles, equipment and devices. Add these together, and you have a wealth of data that can help inform your decisions and allow you to better understand risk.
If you haven’t already augmented your organization’s data with external data, I suggest making this your priority. Look for ways you can marry your customer data—such as credit scores and when the borrower or lessee needs more or new equipment or vehicles—with one or more purchased datasets. This could help you expand into adjacent markets or explore others.
Or, you could use insights from this data to optimize vehicle and equipment refresh cycles. I once ran an analytics project designed to do just that. The data revealed that the lender’s refresh approach was sub-optimizing both the value of the asset and the lender’s natural tendency to refresh customers’ equipment successfully. The resulting upside was tremendous.
Running “what if” scenarios
There are lots of ways auto and equipment financiers could benefit from the ability to run large “what if” scenarios at speed in a risk-free digital environment. Think about where optimization could help you add value or increase revenue. Examples might include:
- New product development.
- Personalized pricing.
- Securitization of assets.
- Residual value maximization.
- End-of-term experiences.
What’s getting in the way of auto and equipment lenders doing this is that they often overlook the value of analytics. Without an advanced analytics capability, they don’t know what to do with their data. So, it sits unused. For this reason, I recommend building and streaming analytics capabilities to strengthen your information supply chain. This might mean investing in solutions that deliver rapid ingestion, preparation and analysis of data. Keep in mind that you need to be able to scale these solutions and act on their real-time insights.
Engaging in wider data ecosystems
Digital twins also offer lenders and lessors the potential to engage beyond their four walls. Imagine if you could connect with an ecosystem of:
- Manufacturers, vendors and channel partners.
Or think bigger and pull all these ecosystems together. It’s not always enough to have a real-time view of what’s happening within your own organization. The full picture includes what’s happening across the entire ecosystem.
In other industries, leaders are already achieving this type of mirrored world. The Port of Rotterdam, for example, uses an intelligent twin to provide shipping companies with a more efficient, cost-effective and seamless experience—by equipping its docks with sensors to collect information such as air temperature, wind, humidity and water conditions, and using AI to analyze the data. The result is that the port can predict things like the preferred times to moor and depart or calculate how much cargo needs to be unloaded at a deeper part of the port to allow a ship to continue sailing through.
Soon, organizations could be able to interact and collaborate within these mirrored environments. However, those that don’t make the leap could miss out, which is why I think auto and equipment financiers need to tackle the complex task of connecting people, processes, technology and data now.
If you’d like to explore how data could support your current and future business, don’t hesitate to reach out to me directly.
To learn more about this year’s technology trends for banks and finance organizations please visit the Accenture website to download “Banking Technology Vision 2021”.