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Market Disruption in Dealer Finance – Creating the ‘Triple Win’

Market Disruption in Dealer Finance – Creating the ‘Triple Win’

In September 2015, I spoke at the Global Wholesale Finance Summit in London, to highlight the importance of innovation and the potential for market disruption within dealer finance under the theme, ‘Doing Things Differently’. A year on, I thought given the very significant changes we have seen in the operating environment, it would be timely to assess to what extent dealer finance has changed and more importantly to assess the potential for disruption today.

In highlighting the potential for disruption I examined the ‘6 Ds’ that have to be present for disruption to take place:

  1. Digitization
  2. Deception
  3. Disruption
  4. Demonetization
  5. Dematerialization
  6. Democratization

These principles, featured in the book How to Go Big, Create Wealth and Impact the World by Peter H. Diamandis and Steven Kotler, provide a fascinating road map on how rapid change can happen and how unsuspecting markets can quickly find themselves high and dry in the face of more agile, customer focused alternatives.

Karl Werner, MotoNovo Finance speaking at the Global Wholesale Finance Summit 2015

The challenge facing established organizations is often one of linear thinking; a belief that because markets have always operated in a particular way, this will continue in the future. Within this linear model, change would be in terms of product, positioning, packaging and pricing. However, the broad process would largely be unchanged. By way of an example, self-checkout tills are not massively radical in supermarkets. They are simply part of continuous improvement. This is no bad thing, but it still leaves the door open to radical reconstruction of an industry.

For me, the big gap in the dealer finance arena has always been that it has been an ‘appointed’ process. Customers have not been in control of their financing process, rather it has been told and sold in the showroom. This is clearly not what consumers want; witness new British Bankers Association data on UK consumer behaviour in 2015:

  • Consumers made 347 million payments using mobile apps in 2015 - up 54% on the previous year.
  • By contrast, the number of payments made using internet banking was up by just 2% in 2015 compared with 2014, with 417 million payments.
  • Mobile device apps were used 11 million times a day in 2015, up from seven million a day in 2014 - equating to around 7,610 times a minute.
  • Internet banking logins fell slightly last year - at 4.3 million a day in 2015 compared with 4.4 million in 2014 as more customers migrated to apps.

If internet banking is falling in consumer popularity, then we must conclude that the ‘told & sold’ dealer finance model is very much out of date. Consumers want to control their finances, much like they want to control all other parts of their lives and they want it to be accessible, easy and high in integrity. This is true for all walks of life. Some medical professionals may be concerned about being disenfranchised by online medical diagnosis tools, others see them as a viable option to manage the challenge of an ageing population. However, whichever way you look at it, the genie is out of the lamp; the customer is in charge. In dealer finance, we have to be better at facilitating the journey. We all acknowledge this fact, and talk about it often, but I believe there is more to be done.

Last year, I commented on the concern about single figure growth in used car finance. This year, even against a challenging backdrop, we have seen a vast acceleration in sales. PCP finance has been a key factor in this trend, meeting the customer’s need for affordability. But, I noted earlier that product innovation was a linear characteristic and it is. The risk of a disrupter changing the process continues to be in play (and we should always be thinking this way). What I think we must learn from the growth of PCPs is their importance to the customer; they provide affordable, accessible vehicle usage. It is where that takes the process that is exciting our team at MotoNovo Finance.

Looking ahead, we as finance companies have to provide the lead for dealers to enable more customers to discover the control, affordability, consumer protection and ease of access that can be gained from dealer finance – and we have to make accessing these attributes easy.

Many of us in the industry love and are excited by cars, but we have to face the reality that many people buy the car as an enabler, a practical tool to get to work and socialize. Their car buying decisions are commonly based on practical considerations rather than vehicle dynamics. Cost invariably ranks near or top of this list, but buyers will not wait until the showroom to discover this option.

The Six D’s are the route map for the entry of a market disrupter; the same principles can equally apply to truly progressive organizations committed to exponential development. Rather than be disrupted, it’s so much better to be the disrupter. It is a principle that continues to guide our growth as we build up to our next exciting process development designed to positively disrupt the current car sales model and in a manner that delivers on our ‘Triple Win’ promise – where customers, lenders and dealers all benefit from innovation.

By Karl Werner (Guest Blogger) at 8 Aug 2016, 11:43 AM



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