The era of Mobility X.0 is upon us, bringing with it new opportunities and challenges for auto finance companies. Here are my top five predictions for what we may see in auto finance in 2020.
1. Winners of the in-vehicle payments platform will lead Mobility X.0
In 2020, we are already seeing connected, in-vehicle experiences expand from infotainment and navigation to e-commerce. Apple CarPlay and Android Auto are just the tip of the spear. At the Consumer Electronics Show 2020 (CES), Amazon unsheathed an expansive vision of software-defined vehicles incorporating Alexa home-to-car and car-to-home integrations and offerings such as Amazon Pay.
Just who will dominate in this space remains to be seen. Although big technology companies are moving in quickly, forward-thinking automakers are also reimagining the in-vehicle experience. BMW, for example, is sharing its vision of autonomous vehicles with an augmented reality layer and a digital personal assistant.
There are three strategies automakers can employ to capitalize on this trend:
- Build a proprietary ecosystem that delivers all aspects of the connected vehicle experience
- Buy a suite of microservices, use a payments-as-a-service platform or otherwise outsource the platform development to a third party
- Partner with a third party to deliver the experience
2. The human + machine workforce matures
A workforce with digital skills will no longer be a differentiator. It will be an imperative. A 2019 survey of US consumers conducted by FICO found that 91 percent would accept, or at least consider, an instant vehicle loan offer if it meant they could avoid dealing with a bank or doing extra paperwork.
In 2020, we’ll likely see companies work to expedite the lending decision process with more sophisticated analytics and intelligent operations. Increasing demand for data scientists is likely to continue, and talent with expertise in the end-to-end payments ecosystem will be vital to helping organizations identify innovative capabilities and support new operating models.
3. When it comes to data, more lenders will start to think like captives
Automakers have long made use of data from vehicles to make maintenance recommendations. What might an intelligent lending operation recommend to its customer based on usage data from increasingly connected vehicles?
How about a recommendation for a new vehicle to better suit the customer’s changing lifestyle and passenger seating needs? For example, an empty-nester whose children no longer ride in the family minivan on a daily basis may be enticed by a well-timed trade-in offer for a smaller, sportier car. Lenders and lessors might also make real-time offers for “upgrade” options—such as heated seats in winter—when the vehicle is already equipped with features that aren’t activated because the customer declined the option at deal origination.
In 2020, auto finance companies will begin to use data in new ways…if they own the data.
Captives are in the best position to own such data and make such offers, given they have the customer experience and data governance structures to support them. While a bank, with access to more detailed customer data, may be better positioned to make a customer a personalized offer, it would need to think like a captive and combine its data with mobility data to formulate a more competitive, real-time offer.
4. Data will go inter-modal
As my colleague, Alan McIntyre, noted in his Top 10 Banking Trends for 2020, Open Banking is prompting companies to look beyond traditional boundaries for opportunities to monetize shared data and add value for customers. Major ride-sharing platforms are serving customers in new ways with shared scooters and bicycles, embedding themselves in the larger mobility ecosystem. Data will have to move beyond a company’s centralized data lakes and into data rivers—ecosystems generating data from multiple stakeholders—to enable new, attractive offers for customers. For example, customers can agree to share data in exchange for lower auto insurance premiums when they finance a new car.
5. All eyes on AI
Shared data presents inherent privacy and security risks. Key topics at the World Economic Forum in Davos were focused on data privacy, inclusive capitalism and the responsible use and governance of artificial intelligence. AI is increasingly making important decisions, from who gets approved for credit to how to answer customer questions about loan decisions in real time. If rehashing a lease deal is assigned to an AI, how can the lessor ensure its AI isn’t making a biased decision? 2020 will likely be marked by an increasing effort, thanks to regulations like GDPR and consumer demands, to explain AI decisions and retrain AIs as needed.
In 2020, I think we’ll see more companies take a meta view of their roles in emerging ecosystems. I’ll be sharing more about these compelling trends over the year.
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