Is it just me or does it seem like everything’s happening at warp speed this year? New tools and technologies are coming online every day, prompting some unexpected conversations around my dinner table—about how our lives might change as we incorporate these new tools into our day-to-day personal and professional activities.
Everyone I know is using generative AI, for example. They’re planning their next vacation, making dinner menus, writing recommendations for colleagues, answering emails and creating art. Frankly, I’m shocked at how quickly my family members and friends have adopted it. And in awe of the potential use cases across industries, including financial services.
But I’m equally fascinated by some of the big trends we’re seeing in the auto and equipment finance sector this year. It’s like my colleague Mike Abbott says in his Accenture Banking report, Top 10 Trends for 2023: The gravity of rising rates: the return of positive interest rates is reshaping the financial landscape once again. In fact, these rising rates could be the rocket fuel that re-ignites financial institutions’ product innovation.
With that in mind, let’s look at three trends I see as being particularly relevant to auto and equipment lenders and lessors.
1. Risk everywhere
Risk is ever-present in 2023. According to the World Economic Forum’s Global Risks Report 2023, the three top global risks in the short term—as rated by global risk experts, policymakers and industry leaders—are the cost of living crisis, natural disasters and extreme weather events, and geoeconomics confrontation (the use of economic tools, like sanctions, for geopolitical advantage).
And, of course, we have expanding regulations, the ongoing risk of cyberattacks, and the threat of impending recession, all of which are likely to result in more consumers and businesses defaulting on their loans or simply tightening their budgets.
Forward-looking finance organizations are already working on strategies to mitigate these risks. They’re investigating embedded finance and subscription or servitization models to appeal to customers big and small.
More than ever, financiers need a holistic approach—a risk function that can identify and prioritize the entire gamut of enterprise risks and determine the appropriate responses. You also need robust risk-management and compliance systems that use advanced analytics tools, predictive models, and AI-driven solutions to monitor and mitigate risks, ensure regulatory compliance and combat fraud. If you haven’t yet honed your digital capabilities, that’s another key area to prioritize.
Risk might be everywhere, but building the right capabilities can help you be prepared.
2. Data becomes a product
I’ve talked before about the tremendous value of data for lenders and lessors looking to better understand risk, optimize vehicle and equipment refresh cycles, or move into new markets. Since then, some organizations have found that the data lakes they’ve created to facilitate data-driven insights have become bottlenecks. Silos also continue to hinder the efficient use of data.
But in 2023, a trend we’re seeing is a shift in mindset. The way Mike frames this is that data should be regarded as the oxygen that fuels the finance organization’s every action, rather than as the CO2 that accumulates as an inevitable by-product. Treating data like it’s a product makes its significance and potential uses more apparent.
How does this work?
- Business cases that rely on data are identified. For example, vehicle or equipment usage and maintenance metrics.
- Priority business cases are assigned a product owner.
- The product owner assembles all the data that is relevant to the business case. This collection of data is the ‘product.’
- Business users—such as data scientists, business analysts, operations specialists, external partners and more—collaborate with the product owner to use the product to deliver business value.
For auto and equipment lenders and lessors, treating data itself as a product could present opportunities to improve your customer interactions, provide more personalized products and streamline your loans processing.
3. Life centricity: from journeys to intent
Optimizing the customer experience has been a priority for many lenders over the last decade or more. In 2023, the trend is toward not just a smooth digital and multichannel experience, but a return of the human connection with customers.
While digitalization has improved many aspects of the finance business, it’s led to some customers missing the personal touch. Like those in any other industry, auto and equipment finance customers are multifaceted human beings who are trying to navigate complex personal and business challenges. Being able to get information online where and when they need it is appreciated, but when they have questions requiring more nuanced answers than they can get from a chatbot, they prefer being able to speak to a person.
Combined with the view of data as a product, lenders and lessors that seek to understand the forces shaping customers’ lives will be in a better position to deliver the improved experiences, authentic interactions and flexible finance products your customers expect.
Do I think this year will be one for the history books? I do. Technological innovation is accelerating at an unprecedented pace. My message to auto and equipment finance organizations is this: pay close attention to the trends, and develop a robust yet flexible strategy that will enable you to thrive in a world that is rapidly changing.
If you’d like to talk about how these trends will affect your auto or equipment finance business, and what you can do about it, feel free to reach out to me.
Also, if you haven’t done so yet, I highly recommend reading Mike’s report: Accenture Banking Top 10 Trends for 2023.
