AUTO FINANCE IN THE NEW MOBILITY ECOSYSTEM

Financial institutions play a key role in the functioning of the automotive industry. And when we look at statistics published by industry associations such as the ALF – Portuguese Association of Leasing or ASFAC – Specialized Consumer Credit Providers Association, we cannot fail to reflect on how current business models will be transformed as we move towards a new paradigm of mobility.

It seems inevitable that current social and technological forces will converge to completely change the way people and goods move around in the future. And the boundaries of this new mobility ecosystem will largely be drawn up and will revolve around “ownership”: Ranging from the current predominance of the individual ownership model to fully use-based shared access.

The growth of shared vehicle access and the consequent potential decrease in the acquisition by private individuals could significantly alter the number and value of financing operations. We will be able to watch the segment move from the private to the corporate, and the total volume financed and associated profitability may decrease over the long term.

In a scenario involving a new mobility ecosystem, it is only natural that finance companies are rethinking their business models to align with new sources of revenue and value creation.

Taking into account this transformative context, fleet financing seems to have a promising future and represents an area with consequent potential for growth. However, among others, new opportunities are revealed.

“In a scenario involving a new mobility ecosystem, it is only natural that finance companies are rethinking their business models to align with new sources of revenue and value creation.”

As shared mobility gains momentum, consumers will need to pay for access not only to travel but also to a wide range of associated products and services. Information, entertainment, and personal assistance may be some examples. Thus, the existence of a convenient and efficient payment processing system will prove fundamental and represents a business opportunity.

This new mobility ecosystem is also inherently based on digitization and much value may originate in the large amount of data generated by vehicles, drivers and passengers. These data can not only be analyzed and capitalized to optimize the operations of the finance company but also, with consent, may be sold to third parties.

We can witness another facet of this same transformative scenario when we see manufacturers assuming the position of providers of mobility services and entrusting the leadership of this initiative to their captive finance companies. Although the latter was conceived under a product-oriented and reactive operating model, they are beginning to have responsibility for creating and delivering a portfolio of customer-focused, digital-based and specifically designed mobility solutions to meet the rapid changes in buyers’ consumption patterns.

All current stakeholders directly or indirectly involved in the automotive industry have a window of opportunity to adapt, transform and succeed within the new mobility ecosystem. And the recognized competencies of financial institutions in today’s critical areas, ranging from data management to digital transformation, are key, leaving them well placed to continue to secure an important role in the future.

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** Opinion article originally published in Fleet Magazine paper edition /March 2017 **

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All opinions expressed are my own and not to be associated with my employer or any other organization I am associated with.