ASSET FINANCE TECHNOLOGY: KEY BENEFITS FOR LENDERS

Asset finance technology can help consumer lenders improve the flexibility of their products, whether they’re vehicle loans or leases or equipment, machinery, or any other asset-backed consumer lending product. For lenders, it’s meant to increase the efficiency, productivity, and profitability of their businesses by helping to track assets and manage invoices. Common among businesses, asset financing similarly allows consumers to purchase high-value goods over time, usually through fixed monthly payments.

Stagnate consumer spending, countrywide lockdowns, and administrative restrictions that occurred early in the COVID pandemic lessened demand for software platforms that assisted lenders with asset finance. The technology used for managing assets began making a quick comeback once restrictions eased, however. Now the projected market for asset finance software is set to reach $3.81 billion over the course of 2023, growing at an estimated 8.1 percent compound annual growth rate (CAGR) to $6.59 billion in 2030. Lenders looking to improve their refinancing, vehicle leasing, auto lending, and other asset-based products would do well to implement modern asset finance technology to improve upon their lending systems.

What Is the Consumer Asset Finance Industry?

Industries worldwide use the asset finance industry to purchase machinery, vehicles, or other high-priced equipment necessary for growing their businesses. It’s essentially the same for consumers. When it comes to consumer asset financing these are normally associated with lending related to airplanes, automobiles, boats, jet skis, snowmobiles, or other vehicles for personal use. It can also be used to refinance any of these types of products. Generally, loan terms are from 12 to 60 months and involve regular monthly payments, though they may include optional balloon payments in certain cases.

Some advantages of asset-backed financing include:

• Approvals are easier to obtain for consumers, and risks are generally lower for lenders than with conventional loans.
• Makes managing cash flow and budgeting easier for both consumers and lenders, as payments are and amounts generally fixed.
• Most asset-backed loan contracts feature fixed interest rates.
• Though failure to pay results in asset loss, it doesn’t affect consumer credit ratings as dramatically and offers collateral for lenders.

However, asset-backed lending does come with a few downsides, including the risk of losing important assets should a borrower be unable to keep up with payments. This also infuses another problem: once repossessed, the asset must be remarketed and resold for lenders to recoup their losses. Another disadvantage for consumers is that loan amounts often vary and are often based on low valuations for the assets involved.

Consumer Asset Finance: Technology Trends to Watch

Every year, new financial technology (fintech) solutions are developed, which seek to make managing financial transactions easier for lenders and borrowers alike. These developments include using technology to make real-time payments and support open banking models while also expanding the use of blockchain technology in the finance industry. With their innovative new products, fintech companies are altering how consumers and lenders transact with each other.

Some asset finance technology lenders should watch include:

• All-in-one computer applications: Though much less sinister than Sauron’s “one ring to rule them all,” in the near future, consumers will be able to use a single software application to conduct all their financial transactions, including their loan payments. This master app will make it easy to securely deal with personal finances at any time and from anywhere that has an internet connection.
• APIs and open banking: These two technologies combine to provide greater transparency for people financing purchases, moving money, and conducting other financial transactions. The result of implementing these technologies lead to faster decisions and, in certain cases (e.g., the case of thin files or alternate sources that show a borrower’s recent credit activity is good) could lead to better rates and terms and higher approval rates for lenders and better rates for borrowers.
• Blockchain technology: Though it’s become essential for tracking products in the logistics industry and is key to all cryptocurrencies, the digital ledgers fundamental to this asset finance technology actually address a number of problems within the consumer finance industry. Look for blockchain to be used increasingly by financial institutions, which in the not-so-distant future will make today’s lending technology look archaic in comparison.
• E-signatures & e-contracts: The adoption of technology to send and sign digitally-based loan contracts rapidly grew during the COVID pandemic. Digital contracts and the ability to sign remotely have made it quicker and easier for borrowers to review and for lenders to approve loans while also augmenting security and privacy.
• Online-only banking: Already many people do much of their banking online, and not just younger generations, as online-only financial institutions are largely replacing conventional in-person banking. Though brick-and-mortar bank branches are unlikely to go away completely, at least in the near future, they’ll perhaps be more geared towards financial investments or other similar services that are better served by personal contact.
• Real-time payments: A trend many fintechs are using allows payments to be cleared and settled in real time at much less cost than other methods. This will allow consumers to make loan payments instantly while making it easier to manage recurring monthly payments.

While arguably some of these technologies will benefit a lender’s customers more than the lenders themselves, many of them will provide a better consumer experience. As we’re seeing throughout the consumer financing industry, that alone is a reason to consider these revolutionary asset finance technology solutions.

Choosing the Best Asset Finance Technology Tools

The whole of the fintech industry is based upon companies that provide software-as-a-service (SaaS) solutions to make financial institutions more efficient and their services easier for customers to use. Based in the cloud, the applications SaaS companies provide allow lenders to scale their operations up and down quickly based on economic conditions. Additionally, many of these technologies help mitigate risks prevalent in the consumer lending sector, including fraud, human errors, and threats to security. For finance companies wondering whether they can afford to spend on cutting-edge fintech in this uncertain economy, SaaS solutions allow lenders to only pay for the services they use. When it comes to asset finance, technology offers a means to make the end-to-end loan process easier for borrowers and lenders alike.