Technology opportunities and challenges facing lessors

Maria Börjesson, chief operating officer of asset finance software provider Emric AB, discusses the current opportunities and challenges in technology in the European leasing market

Asset Finance International: As a leading Nordic supplier of software solutions to the asset finance industry, what are your views on the steps European leasing companies are or should be taking to benefit from technological innovation?

Maria Börjesson: We see three trends emerging that the asset finance industry should jump on if they haven’t done so earlier:

1. Machine learning and analytics – The use of more advance analytics is no longer the preserve of artificial-intelligence researchers and born-digital companies such as Google and Netflix, it’s become a vital part of large banks and lessors should be joining in.

2. Usage-based billing, also known as ‘pay as you go’ and ‘sharing economy’– We have seen that the financing industry is moving to usage-based billing. The market for leasing of hard assets, with their well-established credit risks, could become less attractive, with lower demand and lower margins. The early adopters like car2go, DriveNow & zipcar have already made the move; the question is when the rest will follow.

3. The lower cost of origination due to highly automated leasing software should enable asset finance companies to gain competitive advantage and stay profitable through work force improvements. The freed asset can help companies to realize a shift in focus from back-end to front-end attentive organization.

AFI: Is leasing technology being updated fast enough in the post-recession environment in Europe? Are lessors being held back by out-of-date technology?

MB: It’s hard to make a general statement or generalize. However, we believe that lessors could gain competitive advantage through utilizing the latest technology; this could be from advanced scoring systems to implementation of new financial products which also covers pay-as-use business models. It’s clear that there’s money to be saved and customers to be acquired through technical competiveness.

AFI: How can these leasing companies exploit to their best advantage the increasing interconnectedness of their markets?

MB: Increased interconnectedness will help leasing companies to improve their models of asset valuation, from how much a machine is used to how and where a car is driven. It is also a way to understand their customer preferences and behaviours to develop their services and offers in a fast-paced, changing environment. This interconnectedness can also prevent unpredicted maintenance and help the service provider to retain the customer thorough increased control of the sales channel.