The COVID-19 pandemic has forced many lenders in supply chain finance to pivot their strategies to the online or digital environment. Changes may include payment modifications, more self-service capabilities and increased bandwidth for online transactions. For many, COVID-19 has exposed critical technological gaps in their lender business tools, systems and processes — and inspired speedy change. Lenders who remain ahead of the curve are using digital transformation to enhance their overall performance and streamline processes.
A strong foundation is key to consistent growth and stability for any organization. This remains true for equipment finance lenders in supply chain. In theory, lenders should have the capability to build from their existing processes, procedures and platforms to offer the technology-friendly options customers need today. However, not all companies have the ideal foundation. Fortunately, advanced technology makes it possible for more sophisticated additions to be built from simple foundations. And, according to ABI Research, now is the time to reshape technology strategies and adjust plans in order to best serve the changing needs of customers.
Identifying areas of market need
Lenders who service the supply chain are affected differently depending on their market segments and their loan origination processes. Considering the recent shift in business spending habits, now would be an ideal time for lenders to reevaluate their lending strategies in order to remain competitive. Today’s businesses are looking for a few key financial services:
- Lenders that connect with them through the business channels they use most: For example, shoppers today spend much of their time using mobile and online channels to shop various equipment manufacturers and options. In order to adhere to social distancing guidelines, companies will be looking to secure financing online and through mobile platforms. It also can be helpful to connect with potential customers through the equipment manufacturers, where target customers already are doing business.
- Lenders that can respond efficiently and effectively: Once customers are able to quickly contact lenders online, they also will expect quick responses. The ability to make efficient decisions can mean the difference between a borrower choosing one lender over another.
- Lenders that help them change their financing structures altogether: According to a recent survey from Fleet Advantage, a provider of lease financing for fleets, roughly 50% of fleets have trucks older than 2017 and now are leveraging equipment lease finance programs as a way to upgrade and save on the bottom line.
Merging antiquated systems
New loan origination platforms and solutions can help lenders offer these services that customers need. The solutions can market to a variety of channels where borrowers are already shopping and integrate with manufacturer software to reach customers at the transaction point. Then, they enable borrowers to initiate loan applications online at any time from their mobile devices. This opens up new lending opportunities that might have been missed through more traditional loan origination methods. To facilitate the lending process, built-in artificial intelligence technology can help ensure the lender is offering the right terms for each individual customer or business, speeding up the response process.
As mentioned, lenders also have to update their processes to support business needs during a pandemic. Customers will want to shift away from in-person transactions as much as possible and use digital options instead. Even in the post-pandemic world, it’s likely that customers will expect that the entire loan process — from application to delivery of equipment — can be handled online. Lenders that use technology to approach the market in a more direct way will have a competitive advantage and be ready to take advantage of new business buying patterns and behaviors.
Offering recession-friendly financial services
While many companies are struggling with financial issues, business leaders are looking for ways to relieve their companies of payments in the near-term. Strong lending technology partners are offering lenders creative ways to not only retain business but win new business during this time. Some lending technology partners are offering their customers curated programs that enable the lenders to contact existing customer businesses to offer them refinancing on their equipment finance loans.
For example, if a bank’s customer has an equipment financing arrangement with another vendor, the bank could reach out to the customer with a refinancing offer. If the bank can offer incentives such as no short-term payments, the customer is likely to take advantage of the offer, which only further solidifies the customer’s loyalty to that bank. Plus, with today’s relatively low interest rates, almost any refinancing opportunity will be a better deal than what the customer could find two or three years ago.
Planning for recovery
The sudden shift in working environments has only amplified the need for equipment finance lenders to update their tools and processes. It is critical to include digital and cloud-based options for customers who are now forced into remote working situations. The industry need for technological advancement is clearer than ever before. Companies that learn from the current business challenges and adopt agile solutions will remain more flexible and fluid in times of economic recession and can better prepare themselves for recession recovery.