Value through innovation: Key takeaways from the 2021 Auto Finance Industry Leaders


In today’s connected world, we are notified when our Amazon order is only three stops away, and then receive a text message with a photo of the package when it’s sitting on our front porch. While this disruptive technology seemed innovative not too long ago, it’s now a service all customers expect.  

Even though you may be using digital technologies in your personal life and automating your processes, are you merely a practitioner or are you looking for productive ways to improve your and your customers’ lives through innovative technology?  

Key takeaways from the Auto Finance Leaders Strategic Plan 2021 highlight the importance and urgency of innovation to ensure long-term growth with lifelong customers and advocates. 

Breaking the traditional business cycle 

It’s well known that the traditional auto finance process is cumbersome and often falls short of a great customer experience. Just like other areas of their lives, customers want digital, flexible and innovative services that are highly personalized and easy to adapt to their changing needs. This is even more punctuated with the historically low new- and used-car inventory levels due to the COVID-19 pandemic interrupting worldwide supply chains.  

Industry leaders admit that the “traditional” finance process is rarely customer focused. They must move from a transactional one-and-done business model to one that leverages innovative technology to create a positive customer experience and long-term relationship.  

One way to nurture these relationships is by personalizing the customer experience. Whereas a 50-year-old may be more inclined to purchase a new car, younger digital natives with increasing buying power are looking for car subscriptions.  

Flexible services and lifetime customer relationships 

The key to sustaining lifetime customer relationships is through flexible services such as subscription products and short-term leases. Benefits of this key differentiator in a crowded finance market include: 

  • Customers are more likely to remain loyal if they have the option to switch to the vehicle they want within the same finance arrangement. 
  • Consumers are not required to make a long-term commitment because minimum hire period typically ranges from one month to six months. 
  • Shorter contract periods mean finance companies and dealers can maintain regular contact with customers, which improves the customer experience and generates loyalty. 

Strategies for selling service and controlling data 

Most new cars offer connectivity technology that gives live access to the vehicle’s mileage and condition, driving predictive maintenance and building a unique customer journey with personalized services. This type of nurturing relationship looks beyond the final sale or lease by keeping the customer engaged and ensuring they return to the dealership for maintenance, accessories or a vehicle upgrade.  

The value of data is tremendous and helps create a personalized experience. Rather than simply offering a newer model of the current vehicle at the end of a contract, the dealer could recommend a more suitable one based on how the existing car was used. Dealers can also get ahead of wait times by engaging customers with enough lead time to order the new vehicle before their current contract ends.  

Creating products that customers understand 

Although customers can browse, buy and finance cars online, they may still need human interaction to understand the agreement better.  

One key benefit of online processes is that frequently asked questions can be resolved easily and eliminate surprises. Funders, or even chatbots, can provide detailed guidance on how products work with step-by-step instructions. Other questions answered may include when they can return a car, any additional charges  such as delivery and collection  and how to obtain their finance settlement figure.  

Delivering digitalization with a human touch creates a seamless and positive end-to-end journey for customers. 

Electric vehicles could drive the switch to subscriptions 

Electric vehicles could be the springboard for expanding subscription services. 

Some customers may be wary of committing to a long-term finance agreement with electric vehicles since they are different from traditional internal combustion vehicles. A subscription financing model gives them peace of mind since they can cancel or swap for a different car.  

Digital natives are more comfortable with a subscription service, and this digital innovation can secure future loyalty and provide lifetime value to this demographic.  

Supporting the loyalty cycle

One pain point that keeps auto finance lenders up at night is the rise in online vehicle purchasing. They’re concerned about how the digital sales journey will impact their brick-and-mortar business. For example, online disruptors such as Carvana offer fully online purchasing journeys, including the valuation of trade-ins and financing  which eliminates the need to physically visit a dealership. 

Traditional car dealers are responding by investing time and resources to enhance their online presence to reach the connected customer.  

Experts believe the traditional car-buying experience still has its place, and to stay competitive, they recommend dealerships adopt digital technology that drives efficiencies like automation. Additionally, they can differentiate themselves with a hybrid omnichannel approach, providing an exceptional online experience while maintaining personal elements.  

Five steps to deliver on innovation  

Based on the collective opinions of auto finance industry leaders, the following five steps will secure customer loyalty and lifetime value through innovation:  

  1. Build a customer-centric approach to innovation. Implement flexible customer-led innovation. 
  2. Engage with the dealer community. Understand how auto finance companies can best support dealers in creating a compelling customer journey to compete with online companies. 
  3. Exploit data to drive product development. Unlock the power of data to generate new revenue streams and make well-informed recommendations for customers during renewal periods. 
  4. Prepare an electric vehicle roadmap. Adapt products to meet consumer needs, such as electric vehicles and subscription services. 
  5. Embrace a big-tent approach to strategy. Lots of changes are coming for the auto finance industry. This is a great time to network and partner with digital innovation experts to help define your future strategy.    

Shim Mannan is the executive vice president of product and business development in the Americas for IDS (formerly White Clarke Group).

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