Global Tech Reportdbdci2xaa31q7.cloudfront.net/images/pdf/WCG_Global_Tech_2017.pdfGen Y Millennials (1981-1995) Gen Z DIGITAL NATIVES i Generation (1996- 2012) ‘TECHNOHOLICS’ Millennials

AUTO FINANCE IN THE NEW DIGITAL

ECOSYSTEM

Global TechReport

2017

2017 Global Tech Report: Auto Finance in the New Digital Ecosystem

2


White Clarke GroupWhite Clarke Group is the market leader in software solutions and business consultancy to the automotive and asset finance sector for retail, fleet and wholesale. White Clarke Group solutions enable end-to-end credit processing and administration to streamline business practice, cut operational cost and deliver outstanding customer service. White Clarke Group has a 25-year track record of leadership and innovation in finance technology, consultancy and new market entry. Clients value White Clarke Group’s industry knowledge, market intelligence and innovation. The company employs some 500 finance and technology professionals, with offices in the UK, USA, Canada, Australia, Austria, Germany, India, and China.

whiteclarkegroup.com

http://www.whiteclarkegroup.com


3


Contents

White Clarke Group 2

Auto finance in the new digital ecosystem 4

The road ahead 6

Changing customer 8

Transformational technology 9

Autonomous vehicles 11

Connected car 13

Intelligent portals 15

Credit scoring 16

Security and regulation 17

Business model disruption 21

Innovation platform 23


4

Auto finance in the new digital ecosystem It is now a little over a year since we held our inaugural Auto Captives Summit in November 2015, providing an opportunity for leading executives in the auto finance sector to come together with innovation experts to take a look at how technology is starting to disrupt our industry. We wanted to identify how online, digital offerings will shape and change the way consumers behave and the way the industry works.

At the time, we had a challenging debate about whether these changes should be viewed as “evolutionary” and thus providing faster and more sophisticated ways of doing what our industry has always done, or whether they were truly “revolutionary”, signaling a break with the past and ushering in a completely new future.

Twelve months on, at our second Auto Captives Summit in November 2016, there was universal agreement what we are seeing now is most definitely a revolution. Today the auto finance industry is facing a very significant level of disruption as new technology developments come on-stream at an ever faster rate, fundamentally transforming the way in which companies and consumers do business.

Brendan Gleeson, Group CEO, White Clarke Group


5

Technology is disrupting every industry and it is impossible to predict the full impact, making agility within a business and its core technologies essential. We are now in an age of “connected intelligence”, surrounded by a whole range of products and services which link together to make up a digital ecosystem.

For some finance companies, adopting new technologies will be a way of generating new offerings and gaining market share; for others, those same technologies will prove a major competitive threat. Our discussions at our second Auto Captives Summit sought to identify the trends which will be driving auto finance industry developments throughout 2017 and beyond.

In this report, we share with you some of the key developments and explore critical issues for lenders as they seek to build new business models to meet changing customer aspirations. The auto finance industry is on a journey to a new way of developing services and supporting customers. Our aim is to highlight the signposts to help navigate the way.

Industry 1.0Agriculture

Industry 2.0Industrial

Industry 3.0Information Age

Industry 4.0Connected Intelligence

We are at the beginning of the most transformative revolution ever


6

The road aheadThere is little doubt we are living in one of the most transformational periods of industrial history. The innovation gap is shrinking, and we are experiencing an explosion of innovation as the scale and pace of change accelerates in a way never before seen.

Previous industrial revolutions have taken decades to introduce widespread change. Typically the time lag between developing a new innovation and it having a disruptive effect used to be 30 – 40 years. Now, since the arrival of the Internet, change is happening far quicker than ever before. Take the example of Uber – its model for ride sharing has disrupted the traditional taxi business model around the world, moving from a start-up in just one city, San Francisco, in 2011 to become a service available in over 66 countries and 507 cities worldwide within just four years.

Increasingly, we are seeing companies using technology to create a singular experience, by collecting and analyzing large volumes of data to mine insights into consumer behavior in order to deliver a highly personalized customer experience. Previously consumers were prepared to accept a standardized service, or services which varied according to which channel they used to interact with a supplier. Now they want “one digital life”, seeing the same levels of service across all their touchpoints with a particular company, and expecting that service to be tailored to match their preferences.

150 yrs

75 yrs

40 yrs

? yrs

Industry 1.0Agriculture

Industry 2.0Industrial

Industry 3.0Information Age

Industry 4.0Connected intelligence

Shrinking in

novation gap


7

This new digital ecosystem is the result of four distinct developments coming together and interacting:

ƴ The changing nature of the customer,

ƴ Explosive technology change,

ƴ The disruption of business models as traditional models collapse and new ones emerge,

ƴ Ever-growing regulatory and security demands.

In this report we take a look at each of these trends and consider how they interact, as well as evaluating some of the new services, lenders and others in the auto finance supply chain are already developing in order to introduce new ways of working.

Digital Ecosystem

AIBusiness Model

Disruption

�

Changing Customer

�

Security &Regulations

�

TransformationalTechnology

�


8

Changing customerThe Millennials, those born between 1981 and 1995, have been grabbing the headlines, with much of the commentary centering on their preference for being online, constantly connected and very reluctant to go into a car dealership showroom. This cohort, often viewed as the first “digital natives” have been joined by the latest segment, Generation Z, who have never known a world without instant online access.

Between them they will make up over 60% of the global population by 2020, with a combined purchasing power of $4.6 trillion in the US alone, and so represent a significant new customer base.

However, while both groups share a love of being online, they are actually very different in the way in which they use technology and will need to be treated differently. Already some earlier predictions about how these younger consumers would no longer be buying cars, opting for a sharing model rather than outright ownership, have proved incorrect. Current research suggests that 84% of older and 50% of younger Millennials already own a vehicle. Generation Z consumers, whilst undoubted “technoholics” also display a preference for face-to-face transactions when it comes to making big purchases such as cars.

While an omni-channel approach is essential, as both generations live their life online, companies need to look at segmenting their digital experience to match customer demand. The issue is not just about accommodating the particular device the individual chooses to use, but about creating a personalized experience. With an average attention span for a Millennial assessed at eight seconds, dropping to under three for Generation Z, there is little time in which to attract a potential customer.

Changing Customer

�

Gen Y Gen ZMillennials (1981-1995) DIGITAL NATIVES

i Generation (1996- 2012)‘TECHNOHOLICS’

Millennials are just as brand-loyal in general as other generations

Communication preference: Online & Mobile

88% of Millennials search for a car on the internet

Millennials are buying cars after all; 84% of older and 50% of younger Millennials own a car

Generation Z is less focused on style or brand

Communication preference: Face time

When car shopping its Face-to-Face interactions

92% of Gen Z want to own a car

Digital Native Technoholic


9

Transformational technologyArtificial intelligence (AI) has finally made the transition from an experimental technology in the laboratory to become the single most transformational development of our time, and is set to change all aspects of life.

The goal of AI is to produce software that “thinks” and can make decisions as quickly and reliably as a human. In essence this is a piece of software that replicates the human brain using so called “neural networks”. While we are still some way from replicating a general purpose human intelligence, there have been spectacular successes in the specialized sub fields of AI called machine learning and deep learning. The combination of better algorithms, huge data sets freely available on the internet and massive cheap processing power has enabled the creation of “self-learning” software that is particularly good at pattern recognition relating to text, voice or images, as well as natural language processing.

This has opened the door to a world of possibilities and is the key technology behind innovations such as self-driving cars, voice recognition, and the creation of “chatbot” technology, which is enabling companies to use virtual online assistants to monitor and respond to consumer requests.

Little wonder, then, that consultancy firm McKinsey has said AI is changing things ten times faster and with 3,000 times the impact of the Industrial Revolution.

We’re now seeing growing examples of AI being utilized by businesses in the automotive market. General Motors (GM), for example, has announced a partnership with IBM to create OnStar Go, billed as the auto industry’s first cognitive mobility platform, which is based on the IBM Watson AI product and GM’s OnStar vehicle connectivity and data analysis tool.

Scheduled for launch in early 2017, the new platform will deliver personalized content through the dashboard and other digital channels to make the most of time spent in the car.

TransformationalTechnology

�

AI is changing things ten times faster and with 3,000 times the impact of the Industrial Revolution


10

With the customer’s consent, Watson will learn the driver’s preferences, apply machine learning and sift through data to recognize patterns in their decisions and habits. This information will allow brand and marketing professionals working with IBM and OnStar to deliver individualized location-based interactions that directly impact their target audiences. Companies in retail, fuel, hospitality, media and entertainment, restaurants and travel and transportation and more can use OnStar Go to build individualized mobile, in-vehicle experiences.

Examples of potential uses include using Watson personality insights and Watson conversation APIs to remind drivers to pick up items at the supermarket a few miles before their exit, so they do not have to leave the house again once they get home. The platform employs Watson trade-off analytics to give a traveling foodie dining recommendations from celebrity chefs when driving in a new city, while the retrieve and rank application lets drivers know that their order is ready for pickup at a nearby retail store and one of the store’s employees will load their purchases into the car.

We’ve also recently seen Honda team up with Japanese telecoms and internet specialist SoftBank to investigate the use of AI to improve customer service by developing an “emotion engine,” which changes the relationship between the driver and the car by responding to changes in the driver’s demeanor. An early prototype called NeuV, (New Electric Urban Vehicle), has on-board AI with a virtual assistant called Hana represented by a small, emoji-like face on the car’s dashboard screen. The software remembers which coffee shops the driver favors, and when the heart-rate monitor in the driver’s seat, or the facial recognition system identifies rising stress levels, Hana will suggest a coffee break and place an online order in advance.

Similarly, if Hana detects the driver is heading for a particularly challenging route, the software will offer a map of alternatives and, if they are ignored, will dip the car’s power and provide additional warnings of hazards ahead.

Image source: Honda North America


11

Autonomous vehicles

The most visible use of AI in vehicles is the push towards the “driverless” or truly autonomous car, which is in development with a raft of automotive manufacturers and technology companies competing for first mover advantage.

In late 2016 Tesla, one of the pioneers in this area, has announced that all its models will have the hardware needed for full self-driving capability at a safety level substantially greater than that of a human driver. Eight surround cameras provide 360 degree visibility around the car at up to 250 meters of range. Twelve updated ultrasonic sensors complement this vision, allowing for detection of both hard and soft objects at nearly twice the distance of the prior system. A forward-facing radar provides additional data about the world, capable of seeing through heavy rain, fog, dust and even the car ahead.

To make sense of all of this data, an on-board computer runs the new Tesla-developed neural net for vision, sonar and radar processing software. Together, this system provides a view of the world that a driver alone cannot access, seeing in every direction simultaneously and on wavelengths that go beyond the human senses. Tesla says it will be continuously updating the software using millions of miles of real-world driving data.

Google, which has also invested heavily in autonomous vehicles, has spun off its division to form a new company, Waymo. Waymo is already deploying a fleet of self-driving Chrysler Pacifica minivans onto public roads in Mountain View, California and Phoenix, Arizona, where the company’s self-driving Lexus SUVs have already driven thousands of miles over the past few years.

John Zimmer, co-founder of ride-hailing firm Lyft is predicting an end to car ownership in major US cities by 2025, saying that most journeys will be made via networks of driverless vehicles controlled by companies such as his.

At the end of 2016, Lyft began testing autonomous cars on the streets of San Francisco and Phoenix in partnership with General Motors, while rival Uber is starting to carry passengers around Pittsburgh in autonomous cars with a human backup driver.

Zimmer said autonomous cars will start out giving rides at low speeds, around 25 miles per hour, in limited areas with a number of restrictions including not operating during bad weather. The main appeal will be the reduced need for car parking spaces, and lower lifetime costs for users.

Uber is starting to carry passengers around Pittsburgh in autonomous cars with a human backup driver.


12

Driverless cars are also set to change the business model for companies like Uber and Lyft, who are likely to own fleets of autonomous vehicles and monitor their operation, which would reduce the overhead of making payments to their drivers.

Meanwhile, Ford has said it will mass-produce a fully autonomous self-driving car without a steering wheel by 2021. The manufacturer has pledged to double its investment in research in this area, as well as making sizable investments in technology companies in the autonomy industry.

Volvo Cars has set up a new jointly owned company with Autoliv Inc, a market leader in automotive safety systems, to develop next generation autonomous driving software.

It will be called Zenuity, and its systems will be developed for use in Volvo cars and for sale exclusively by Autoliv to all car makers globally, with revenues shared by both companies.

In France, Navya, a French company specializing in electric, autonomous vehicles is joining forces with Keolis, a public transportation specialist and operator, to launch Navly, which it says is the world’s first autonomous, driverless public transportation service.

The service is currently being tested in Lyon, and uses a Navya Arma vehicle, an intelligent driverless shuttle that can transport 15 passengers at speeds of up to 45 km/h. The Arma vehicles have no steering wheel or pedals, run on a battery, are 100% electric and are fitted with high-performance guidance and detection systems, including light detection and ranging surveying systems (LiDARs), stereovision cameras, and motion sensors.

From September 2016 for an experimental period lasting a year, two driverless and fully-autonomous electric shuttles are operating along a 1,350m route calling at five stops between a main shopping center and the southernmost point of the district. The itinerary has no traffic lights, crosswalks or intersections, and with an average speed of 15km/h, the journey will take around 13 minutes.

Ford has said it will mass-produce a fully autonomous self-driving car without a steering wheel by 2021


13

Connected car

Autonomous vehicles face a number of barriers before gaining wide public acceptance, including concerns over reported crashes and increasing regulatory scrutiny. However, the “connected car” is already with us, as cars increasingly come to represent data on wheels.

It has been stated that computer systems for an F-22 fighter jet have around two million lines of code; the connected car has over 200 million. As the focus shifts from providing consumers with products to providing services, the data that is available from inside a vehicle is going to become commercially valuable. For example, weather service providers could pay for information from sensors on a car’s wipers, and insurance companies can use driver behavior data to create dynamic pricing for insurance policies without the need to install specialized aftermarket telematics devices in each car. Highway maintenance companies will want the information from telematics boxes recording speed, bumps on the road and other traffic details.

For floor-planning, one of the biggest costs is making physical stock checks, but the minute the connected car drives off the lot, it can tell the dealer where it is, and trigger payments to lenders automatically by linking back to finance systems.

Cameras

Parking Assist

Location

Fuel

Weather

Speed

Engine Data

Radar

�

�

�

��

�

�


14

As the car becomes part of the customer’s digital experience, the challenge is around who owns the data and who owns the customer relationship. Google and Apple have already placed their apps and interfaces inside cars via their products: Android Auto and iOS CarPlay. Both systems allow the driver to connect their smartphone which takes over a car’s navigation, communication and audio systems with modified versions of the key apps on the phone. Google Now’s voice system and Apple’s Siri take over the car’s voice controls and can be launched from a steering wheel button. That way, drivers have a better chance of keeping their eyes on the road and their hands on the wheel.

Apple and Google say around 40 car makers have committed to the new systems, but while drivers have been enthusiastic about the benefits of an easy to use, familiar interface, car manufacturers have to decide whether to partner with the tech companies or keep control of the dashboard–and all the data–themselves.

Ford, which does offer CarPlay and Android Auto, is hedging its bets after releasing its rival technology, SmartDeviceLink (SDL), as open-source software three years ago. Toyota is the first carmaker to adopt SDL, and one of the major manufacturers to hold out against the tech companies’ bid to win the “infotainment” war with the car makers.

There is a lot at stake here. John Ellis, managing director Ellis & Associates, is a global technologist and former head of the Ford Developer Program at the Ford Motor Company. His prediction for the next stage of development is the “zero dollar car”, as providers pay the driver for the right to the data it supplies.

Ellis calculates the average car driver is worth $5,500 a year to a range of providers keen to buy the data from the car’s systems and sensors. The challenge for auto finance lenders is making sure they are the provider which retains the contact with the car, and the consumer, over the whole lifetime of the vehicle.

Finance lenders need to find ways to ensure that they maintain an equally close connection with the borrower, providing account updates, details of new offers, analysis of vehicle usage direct to the driving seat.

Car manufacturers have to decide whether to partner with the tech companies or keep control of the dashboard–and all the data–themselves


15

Over the coming years 50% of online traffic will involve voice interaction

Intelligent portals

Technology has now become the lens through which customers experience a company and its service, so how a business presents itself online through an intelligent portal is key to its success. Customers are looking for a digital journey which is seamless, end-to-end, and which is simple and intuitive to navigate. Companies such as Google and Amazon already provide them with this, and both of these brands are now moving into areas like financial services where they can leverage their familiar customer interface.

Voice technology is becoming an increasingly important element in this. While last year just 10% of online activity was via voice, over the coming years 50% of online traffic will involve voice interaction. According to an industry report from VoiceLabs, estimates suggest there will be 24.5 million voice-first devices shipped in 2017, a significant increase on the 1.7 million devices distributed in 2015 and the 6.5 million units sold in 2016. The research indicates there are now over seven million Amazon Echo devices in consumers’ homes, and growing acceptance of voice-first interactions will put pressure on companies to utilize the technology in applications such as virtual assistants for online customer services queries.

AI makes natural language processing possible, and talking to a system is a much quicker and more user friendly interface than typing out information. For companies trying to build and maintain a customer relationship online, chatbots will enable them to offer conversation in what are, effectively, multiple one-to-one voice or text exchanges.

Offering online and increasingly mobile services to customers presents a challenge around managing relationships – while the aim is to standardize processes and so increase efficiencies and reduce costs, companies also want to build a relationship with each individual. Interactive voice assistants such as Amazon’s Alexa, Microsoft’s Cortana, Google Now, and Apple’s Siri know how to simulate human conversations via voice and text to answer queries or perform service tasks. But a key benefit for financial services companies is that these conversations will be compliant with all relevant regulations, as the AI system will ensure the chatbot follows and logs all of the relevant regulatory rules and requirements.

�


16

Credit scoring

Traditional credit scoring is based on assessing a small number of strong variables, but AI allows companies to use a huge number of weaker variables to arrive at a decision. Using this approach, in 2012 Zest Finance reduced its bad debt and default rates for personal sub-prime lending by 33% by analyzing some 70,000 variables and multiple data models. This was despite creditor lists where 10% of the names were of people who were dead and there was no single complete record.

Machine learning, which is the ability of the system to react and learn from the transactions it processes is a sub-set of AI which is gaining importance in areas like credit scoring as it can refine activities like fraud detection.

“It is no longer a question of simply putting people into groups based on their past transaction history. We can use technology to create a segment of one, for increased personalization. The system will monitor that individual’s activity and change the offering as their journey online progresses. That is also important for compliance, as it makes it possible to demonstrate to a regulator exactly how the customer was handled,” explains Richard Harris, Head of International Operations at Feedzai, which has built a platform for fraud and risk monitoring.

Harris points out that 90% of the world’s data has been created in the last two years. That provides a powerful source of insight into customer behavior, particularly if all online activity can be analyzed in one place, across all channels.

AI’s ability to handle this kind of messy data is transforming credit decisioning and opening up emerging and sub-prime markets, as well as improving offers to younger consumers who often do not have traditional credit markers such as mortgages, but who are active on social media. It is worth noting that customer protection and regulation concerns have recently halted Facebook’s plans to offer financial services companies direct links to its user information.

90% of the world’s data has been created in the last two years


17

If systems are not secure, consumers will not take on a digital journey, so there is customer pressure to ensure they trust the technology.

Security and regulationThe level of security required in digital systems and the regulatory requirements for lending are constantly increasing. The EU has taken on Google in this area, and closed the safe harbor agreement covering processing of sensitive data in overseas centers, while in the US the Consumer Financial Protection Bureau has become very aggressive towards auto lenders, notably fining Ally Financial some $98 million over discriminatory practices. In the UK, the Financial Conduct Authority’s “Know Your Customer” requirements are onerous in their anti-money laundering provisions.

If systems are not secure, consumers will not take on a digital journey, so there is customer pressure to ensure they trust the technology. Highly publicized instances of email hacking, along with several cases where customers were denied access to banking services and the leaking of private data have made it clear that cyber criminals are becoming very sophisticated as they attempt to gather information that can be used or traded for profit, prying into applications, operating systems and even deeper into system hardware.

Media coverage of stories such as the Russian influence over the most recent US election and moves by high profile whistle-blowers to bring government monitoring into the public eye have increased the public’s lack of trust in IT security. Technology companies are being forced to react to these growing concerns, with social media and tech giants such as Facebook, WhatsApp and Google all making public commitments to providing more secure applications.

Traditionally, security has been viewed as something of an “add on”, requiring an extra layer of software. However, now that security features are built in to systems from the beginning and companies are taking a multi-layer approach to security, those systems are far more secure than the manual or semi-automated processes they replace.

Security &Regulations

�


18

Data

Workflow

Signature/ID

Payment

��

�

�

Zurich, CH

455-3341

€233

624-00-1414

Take e-signatures, for example. Previously, the focus was on offering consumers a simpler way to sign up. Now companies like DocuSign have taken the concept much further, to digital transaction management. This is an end-to-end solution combining e-signature, e-identification and self-billing applications into a seamless experience for the customer. This offers significant cost savings at the onboarding stage, but also provides a far more compliant process since all the data is held secure and tamperproof, rather than relying on faxes of paper identification.

“Smart contracts” are beginning to replace paper and “keep it digital”, using technology at the point of execution for data checking, to drive payments and to speed up workflow. We are seeing a move to real-time, connected, self-executing, self-enforcing and trustworthy applications which improve conversion rates, save costs and improve security and compliance.

“Smart contracts” are beginning to replace paper and “keep it digital”


19

Another significant development is the growing support for blockchain technology. Originally developed as the underlying technology for the crypto-currency Bitcoin, blockchain is effectively a distributed database that maintains a continuously-growing list of ordered records called blocks. Each block contains a timestamp and a link to a previous block. Blockchain is a method of recording data – offering a single, digital ledger of transactions, agreements, contracts – covering anything that needs to be independently recorded and verified as having happened.

The key difference is that this ledger is not stored in one place, but is distributed across several, hundreds or even thousands of computers around the world. Everyone in the network can have access to an up-to-date version of the ledger, so it is very transparent. Once updated, the ledger cannot be altered or tampered with, only added to, and it is updated for everyone in the network at the same time. This provides a very secure, compliant system, as the ledger does not store the original details of the transaction, but a mathematically produced “hash” of the data which is encrypted. The distributed nature of blockchain, and the fact the hash cannot be converted back into the original data makes it impossible for hackers or fraudsters to manipulate or steal the information.

Blockchain for businessBroader participation, lower cost, increased e�ciency

Shared ledger

Append-only distributed system of record shared across business network

PrivacyEnsuring appropriate visibility; transactions are secure, authenticated & verifiable

Smart contract

Business terms embedded in transaction database & executed with transactions

Consensus

All parties agree to network verified transaction


20

Danny Williams, IBM’s Chief Innovation Officer, argues that this technology holds great promise for the auto finance arena, as a way of connecting manufacturers, dealers, lenders, leasing companies, lessees and others in the supply chain. At the moment, each stage of the process is recorded on multiple ledgers, with each participant holding their own copy. That makes it harder to track the underlying assets, and transactions are slow and error prone. In contrast, blockchain offers a single ledger which is a synchronized record to assets and transactions held on a shared network which decides who has the right to view that information and at what level. Transactions are near instantaneous, while this approach reduces error and cost and ensures transactions are secure, with a complete audit trail for compliance purposes.

Manufacturer

Scrap Merchant

Dealer Leasing company

Lessee

Car Leasing Business Network with Blockchain

Insurance companies

GaragesAuction houses

Smart ContractsShared Ledger

For the full video presentation of this topic, please visit whiteclarkegroup.com

http://whiteclarkegroup.com/videos


21

Business model disruptionWhile technology offers new ways to tackle old problems around efficiency, compliance and security, there is no doubt that the accelerating pace of technology change throws up challenges as well as opportunities.

As the online world becomes the norm, we have seen some high profile examples of businesses which failed to adapt or innovate.

Borders bookshops, a $100 million international chain in 2005, lost its business once Amazon arrived and was bankrupt by 2011. People did not stop reading–in fact sales of books have increased–but the nature of the customer experience changed. Blackberry, a $50bn company in 2009 which captured the market with innovative technology, failed because it did not build on its lead by providing the kind of experience its users wanted once touch screens became the norm. From its once dominant position in the phone market it now holds less than a 1% share.

In these cases, and many other examples, the leading companies in their field simply failed to respond to the new ways in which consumers wanted to buy goods and use services. Already the car industry is being disrupted, with further seismic shifts on the horizon. Google has had a banking license since 2007, Amazon offers loans to SMEs and have begun selling car parts, and both companies have the smart, intuitive user interface needed to win customers, posing a significant threat to traditional sources of finance by providing an easier way of getting quotes and negotiating loans and leases.

With the possibility of the connected vehicle becoming a “zero dollar” car, as companies agree to pay drivers for the data their car sensors can supply, finance companies face new challenges to their traditional model. If those payments serve to reduce the list price of that car, then what is left for lenders to finance?

Business ModelDisruption

�

Borders bookshops, a $100 million international chain in 2005, lost its business once Amazon arrived and was bankrupt by 2011

Closedby Amazon


22

Highly innovative technologies which seemed to have only specialized application are starting to move into the mass market, with 3D printing a prime example. In 2014, the first vendor supplied 3D digitally printed car parts, and by 2016 a printed vehicle has been produced. The US Department of Defense has said it plans to invest in 3D printing to provide spare parts on the battlefield, in order to shrink the supply chain.

As this technology becomes mainstream, OEMs, manufacturers and lenders will need to consider the implications for how cars are configured, the way residual values are calculated, and the options (if they exist) for remarketing a 3D printed vehicle.

Currently, traditional car finance focuses on lending on a specific vehicle used by a specified driver. The aim is to use technology to improve online direct channels to that customer. The options are to finance more cars, or to finance more “over air” services into that car by capitalizing on the links into the vehicle.

However, lenders and fleet suppliers are starting to develop mobility packages which combine short or long leased cars with other forms of transport including trains, planes or bikes. Eventually there could even be the so-called “robo-cabs”, 3D printed vehicles produced on demand and rented according to usage. The dealer in this scenario would become a mobility manager, competing with ride sharing operators like Uber and Lyft.

This kind of development is not linear, so at any one time any or all of these models are likely to be in demand and in operation. The key to success will be in providing the right customer experience, one which is both mobile and intuitive, and in seizing the opportunities new business models offer.

Fintech companies, for instance, have pioneered P2P platforms where borrowers can be matched with investors. OEMs could adapt this approach in the used car market, as they have systems which provide a full history for each vehicle and the credit history of potential buyers.

In 2014, the first vendor supplied 3D digitally printed car parts, and by 2016 a printed vehicle has been produced


23

Innovation platform

Faced with these changes, the successful auto finance companies will be the ones that understand technology in order to innovate, in a continuous loop of improvement. What they need to create is a platform for a range of services, rather than a series of point solutions.

That platform needs to create an agile customer experience which is:

ƴ Personalized and built around the customer

ƴ Transparent, so pricing is clear

ƴ Integrated, providing one digital life

ƴ Predictive, using AI to develop new services

ƴ Smart, so systems learn as they go

ƴ Delightful, so customers enjoy a simple conversation about their needs

ƴ Compliant

Technology is driving major change, as lenders start to move from a system of record to one of engagement, using a platform to create the foundation for an immediately responsive customer relationship that will last for years to come.

Auto finance companies need to start now, to ensure they remain in the driving seat.

Secure & Trusted

Agile

Tech

AI

End-to-endself-serve

Intelligentportals

Socialmedia

AI drivenbig data

Simple digitalE-sign & i-ID

Connected car data

Intuitive tech

Microservices

Secure & Trusted

ComplianceProtection

SmartLearns and grows with you

DelightfulSimple, intuitive and convenient

PersonalizedBuilt around you

TransparentSeen to be fair

IntegratedManage your ONE digital life

PredictiveKnow before you need to know

Platforming the Agile Customer Driven Experience


24

Thanks for reading.For more great industry news and insights you should have a look at our website:

whiteclarkegroup.com

http://whiteclarkegroup.com/knowledge-centre

Documents

Global Tech Reportdbdci2xaa31q7.cloudfront.net/images/pdf/WCG_Global_Tech_2017.pdfGen Y Millennials (1981-1995) Gen Z DIGITAL NATIVES i Generation (1996- 2012) ‘TECHNOHOLICS’ Millennials