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Digital Technologies in the Equipment Finance Industry

Digital Technologies in the Equipment Finance Industry

By Peter Minshall, Executive Vice President - North America at NETSOL Technologies, Inc. on 20-04-2021

With more than a staggering 10 billion devices connected to the internet, digital technologies have become critical for businesses in the 21st century. With the upheaval caused by the Covid-19 pandemic, the equipment finance industry, like most industries, fared dismally. The MCI-EFI (Monthly Confidence Index for Equipment Finance Industry) plummeted to a historic low of 22.3 in April 2020, down from 46.0 in March 2020. The pandemic has caused customers to transition to service providers that are better at adapting to the disruptive changes in business demands.

During ELFA 2020 Business Live, speakers predicted that the Covid-19 pandemic caused the equipment finance industry to accelerate its adoption of industry 4.0 technologies by 7 to 10 years. In another report by Accenture, 88% of equipment finance leaders agreed that this was a critical time for innovation. Prominent Equipment finance captives have already started innovating, offering EaaS (Equipment-as-a-Service) financial products, complete with fully covered maintenance and SLAs (Service Level Agreement). In January 2021, ELFA released its top 10 trends for the equipment finance industry, predicting the adoption of industry 4.0 technologies, along with innovative business models built around modern smart technology.

For the digital transformation of any equipment finance company, the adoption of AI, IoT, Blockchain, and AR/VR, amongst other technologies, is required. Modern technology uptake enables the Equipment Finance Industry to expand into additional "Usage-Based" business models. A business ingrained with these technologies promises greater adaptability, higher customer processing volume, lower customer fraud risks, and increased business revenue streams.

Artificial Intelligence (AI) is certainly one of the most profound inventions of modern times, with the potential to impact multiple areas of daily personal and business life. Equipment finance companies can harness AI to predict whether a lessee will default on their contract. Due to this Smart Credit Appraisal process, AI can scrutinize customer data to generate the best-matched proposals and can help lessors come up with Suggestive Promotions made up of tailored plans for each customer. Furthermore, finance and leasing companies can set looser or stricter contract terms than would be possible under manual evaluation, in order to manage or mitigate risks.

AI can also assist with sales/lead generation and customer service through Smart Chatbots. Businesses can save money on call centers by having AI-based customer portals with Chatbots. Chatbots can be equipped with knowledge engines to answer FAQs, show current contract status, and generate change requests in the repayment plans. The portal can also leverage customer data for Smart Credit Appraisal and Suggestive Promotions to produce tailored proposals for each customer.

Accenture found that 93% of equipment finance management claimed their organizations were piloting or adopting AI. In another report, Deloitte found that banks, through digitization and automation, could save up to 70% of the time spent in processing paper forms and applications. Forbes stated that 65% of senior financial executives expect positive results from using AI in financial services.

The Internet of Things (IoT) revolves around smart interconnected devices and sensors generating lots of actionable data. IDC predicts that by 2025, there will be more than 55 billion connected devices worldwide. The data generated by smart IoT sensors on assets, scrutinized by AI models, can depict real-time Asset Health for predictive maintenance. According to the Wall Street Journal, industrial manufacturers lose an estimated $50 billion annually in unplanned downtime costs. Equipment failure accounts for more than 42% of this unplanned downtime, resulting in excessive maintenance, repair, and equipment replacement. Predictive maintenance is essential for equipment finance companies with operational leases or EaaS (Equipment-as-a-Service) business models. Lessors can mitigate risks by monitoring asset health during the contract and get their equipment/rigs back in pristine condition. Moreover, lessors with EaaS offerings can harness data generated from the connected equipment to identify usage amounts, to simplify and automate the billing processes, achieving accuracy at the highest levels.

Blockchain (DLT) infrastructure is one of the most secure ways to store validated contract data. World Economic Forum states that "Blockchain Will Become the Beating Heart of the Global Financial System." The lease contract becomes a chain between the lessee and the lessor, bypassing hard copy and standard electronic records. This chain can extend to include further financers/purchasers of the asset, along with any insurance or service entities. Since the contracts stored in the chain are permanent/unchangeable, this proves beneficial for equipment finance companies because now they can see all the previous ownerships, transactions, and services attached to any specific asset, thus improving asset security. Santander estimated that with the use of Blockchain, more than $20 billion could be saved annually in back-office cost savings.

Augmented Reality and Virtual Reality promise innovation for equipment manufacturers in their operations and dealings with customers. Companies can design complete training programs in VR to provide hands-on training to equipment operators. Equipment customers can also virtually experience the specifications, colors, and workings of the asset they are interested in through AR implementations or VR headsets. A survey yielded major examples of where equipment manufacturing companies were leveraging AR/VR:

  • 60% - Virtual Supplemental Labor on Production Lines
  • 53% - Virtual Customer Service Visits
  • 53% - Virtual Design & Engineering
  • 26% - Employee Training

Caterpillar has done one of the best implementations of AR/VR. At Caterpillar, customers can point their phone cameras or head-mounted devices at an image of a piece of equipment, and suddenly a complex and detailed virtual model appears for them to interact. Caterpillar also has its CAVE Virtual Reality System, where customers can demo the full range of Caterpillar products in minute detail through VR.

With the advent of the Post-Digital Revolution, adopting industry 4.0 technologies has never been more critical for equipment finance companies. In the pandemic-stricken world, businesses that relied predominantly on digital technologies rose, while businesses that revolved around legacy systems saw difficult times. Equipment finance companies need to decrease their dependencies on legacy systems by opting for premier, next-gen solutions. Solutions that are adaptive to their business, their growth, and the future.

NETSOL Technologies is at the forefront of the digital transformation of more than 300 satisfied clients. NETSOL's industry-leading solutions, NFS Ascent and NFS Digital, look to elevate equipment finance companies by efficiently managing their multi-tenant operations while driving growth in competitive markets. Despite the pandemic, NETSOL successfully delivered seven projects in 7 countries in record times, achieving on average a 40% cost reduction for its various clients.

Additionally, NETSOL has a strategy to extend "OTOZ", its flagship MaaS (Mobility-as-a-Service) product, to work with NFS Ascent and NFS Digital to cater to multiple equipment usage-based models, including but not limited to, EaaS (Equipment-as-a-Service) subscriptions and financing.

With NETSOL, you can transform your processes, your costs, and the future. Click here to get in touch with us.

Written By:
Peter Minshall, Executive Vice President - North America at NETSOL Technologies, Inc.

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