Fred Carollo
Watching old sci-fi movies, you might chuckle as the imagination of the writers comes to life with self-driving cars, smart appliances creating grocery lists and robots ordering lunch.
Now imagine this: what if you could sell your equipment and services online with instantaneous financing approvals, direct delivery of equipment and funding based on an auto-confirmation of receipt? What if that equipment directly connected to usage hubs that automatically paid the dealer for services, alerted for overages and shut down equipment when there was a lack of payment? Could this become a reality for office-equipment finance in the 21st century?
Denis Stypulkoski
Further digitalization is unavoidable in any industry. Our online experience as consumers has upped the game for all industries, and B2B transactional services have been feeling the pressure to compete at a higher level. The importance of digitalization is even more critical in a high-volume, fast-paced industry like that of office products. Unlike many other financial transactions, the office-products business isn’t a “one-and-done” transaction—it is an ongoing relationship with multiple touch points between the leasing company and vendor. This includes everything from the initial credit application process to reviewing the funding package and offering end-of-term upgrades. Instantaneous access to this information can make financing a seamless service.
Fortunately, there are more resources than ever to aid financial institutions in the digital-transformation process. This is not to say that digitalization is a new thing. Most financing companies have had an online portal to submit applications—and follow the process through to billing and collecting for meter reading—for over a decade. So what has changed? As a whole, the industry is getting smarter about improving its digital capabilities and implementing new ways to make customer portals even more user-friendly. At TIAA Bank, we’ve focused on building a portal that’s intuitive, easy to navigate and covers a wide range of business services.
There are many roads a finance company can take to improve its data analytics and define its digital-transformation roadmap. Leveraging existing technology from other online platforms can jump-start improvements to the client experience. For example:
- Artificial Intelligence (AI) is the ability of the software to predict user behavior based on past experience, or act intelligently to apply logic to a pattern of processes.
- Application Programming Interfaces (APIs) allow different programs to talk to each other through common language developers used to connect with other applications. This would help link the online platform of a vendor directly with that of a lender. We believe APIs are a significant development in our industry, helping the connectivity between lenders and dealers become even deeper and more efficient.
Industry associations are collecting data that can aid institutions in choosing the best path. The Equipment Leasing & Financing Association (ELFA) recently published an article (Hodges, 2018) recommending leasing companies take a number of steps to transform their technology, including implementing smart contracts, finding opportunities to apply AI and thinking ahead about potential ways to use blockchain technology. Digital platforms are now able to include these smart contracts due to industry-wide changes in regulations aiding the adoption of e-documents as an industry standard.
While implementing digitalization for commercial financing is seen as a priority, the shift also comes with some constraints. According to a recent survey of equipment-leasing and asset-finance companies by The Alta Group (Rizzi, 2018), companies are facing a number of internal roadblocks, and siloed organizations pose a challenge to a full digital solution. In the report, 75 percent of lessors said organizational issues were a constraint in implementing digitalization efforts.
In addition, the report noted that fin-techs and alternative lenders offering a holistic digital platform experience “are not (yet) capturing meaningful market share or creating enough concern for companies to make radical departures from their business models—for many, the fear of losing business has yet to materialize.”
Historically, there have been a number of other challenges, including the potential security risks of greater information flows, as well as the complexity of integrating IT functions. For example, since vendors tend to use a variety of different operating systems, prior technologies made it difficult for a lender to directly connect their platforms to a wide range of vendors. They needed to work with individual IT teams from each vendor, which required a significant investment of time and money that may not have been justified for all organizations. Current API technologies with secure external gateways address most of these challenges.
Despite the challenges, it’s clear that our industry is moving forward when it comes to adopting new technology. The chief benefit of digitalization in the financing process is the faster and more-reliable assimilation of data. In the office-products industry, the fast-paced, high-flow nature of the business makes it particularly ripe for digital changes that have the power to transform the way we connect with clients.
Fred Carollo is the originations leader for office products and Denis Stypulkoski is senior vice president, CIO, vendor equipment finance at TIAA Bank in Parsippany, New Jersey.
Cited:
Hodges, S. (2018, September). 6 Technology Steps to Take Now. Retrieved from: https://www.elfaonline.org/news/magazine/all-issues/issue/article/july-august-september/6-technology-steps-to-take-now
Rizzi, J. (2018, August). Digital Transformation: Is the Equipment Finance Industry Falling Behind? Retrieved from:
Digital Transformation: Is the Equipment Finance Industry Falling Behind?
TIAA Bank® is a division of TIAA, FSB. Financing is provided by TIAA Commercial Finance, Inc., which is a subsidiary of TIAA, FSB, and not itself a bank or a member FDIC.
