Equipment finance industry embraces digital technology

Equipment finance companies are on a push to replace ageing front and back office systems, as digital technology starts to make its mark on the industry, according to a research report from the Equipment Leasing and Finance Association (ELFA) and Capgemini, a global provider of consulting, technology and outsourcing services.

The report, the 13th annual survey of IT trends in the sector, finds that while the equipment finance industry has been a slow adopter of digital technologies due to the constraints of working with legacy platforms, strong recognition exists for capturing digital capabilities via replacement of back-end systems while continuing to make improvements on front-end workflows.

According to this year’s Business Technology Performance Index (BTPI), replacing existing systems is now a top priority for equipment finance firms.

Michael Baez, manager of banking and diversified financials for Capgemini Financial Services, said: “In the wake of intensified competition, increasing compliance, shrinking margins and evolving customer demands, leading equipment finance firms are trying to meet these challenges by looking to replace their front- and back-end systems. Core legacy platforms are antiquated, expensive to maintain and in many cases, don’t meet current or future business needs.”

Back-end focus

One of the key findings of the BTPI report, which is based on industry research and input from ELFA members, is that finance companies are starting to focus more on the back-end systems used for servicing, or the period after the booking of a transaction, which includes accounting, customer service, collections, end of term and asset disposition. Traditionally more of the spend has been on front-end systems covering originations, or the activity related to a transaction from the time of application to booking, including credit underwriting and documentation.

Reversing the usual findings, 40% of the survey respondents indicated that a back-end platform replacement would be considered in the next 18 months, while only 25% said the front-end platform would be looked at.

According to the data, a total of 60% of respondents indicated that their core back-end platform does not meet their future needs, while 40% indicated that their back-end platform doesn’t meet their current needs.

Nearly half of all respondents indicated that their core front-end platform does not meet their future needs, with 40% of respondents looking for increased workflow capabilities.

The data shows that a majority of companies are more interested in establishing a single, enterprise-wide package-based solution, with almost 40% reporting interest in implementing best-of-breed solutions from multiple vendors.

Big data

Over half (61%) of respondents said big data is becoming a driver of current revenues as it helps them identify opportunities for cost savings. While a quarter of respondents do not currently have cloud computing and 60% consider themselves adoption beginners, it is expected that cloud capabilities will grow in the coming year.

Over half of the respondents also indicated that mobile is a best-in-class offering and they have planned for it in the future, despite 60% of companies currently ranking themselves at the bottom of an adoption lifecycle.

ELFA president and CEO Ralph Petta said: “ELFA is pleased to offer the 13th annual Business Technology Performance Index. We encourage our members to read the report to gain insight into the technology trends that equipment finance companies are using to drive their firms into new opportunities and improve operations.”