ANALYSIS: Is coronavirus a crisis for asset-finance operations or a catalyst for technological change?
Business leaders have largely embraced the rapid introduction of home working and digital processes as an inevitable necessity. Though the global lockdown has rapidly accelerated trends in digitalization, seeing many asset finance businesses moving their operations entirely online in a contracted timescale, the direction of these developments is not a new concept for the industry.
As a result, the past three months of Zoom, Teams and Slack meetings, shopping exclusively online, and a new appreciation for IT infrastructure staff, have defined a new — though not unexpected — future for how businesses will operate, long after office doors reopen.
In many cases, the enablement of remote working has required extensive staff support and guidance, the implementation of a range of new tools, and the assessment of policies and procedures for managing sensitive customer data. Despite this, digitalization was becoming increasingly essential to maintaining the flow of finance prior to the coronavirus outbreak, with its role already crucial in various aspects of everyday business, from customer communications to fast finance decisions.
With acceleration, however, asset finance businesses are experiencing a more prevalent focus on developing or enhancing self-service options to meet customer expectations. Both internally and externally, the disruption of business has prompted a tidal wave of enquiries, with asset finance in particular dealing with new customer requests to postpone payments, discuss arrears or resolve issues in sourcing new funds under government-backed schemes.
To expedite responsiveness to these queries, chatbots and artificial intelligence-driven services are seeing greater interest as a means of fast, convenient support. Meanwhile, other technologies such as e-Signing, e-Identification and document imaging services with built-in consumer notifications have seen a surge in uptake as a secure, straightforward means of speeding up administrative processes.
Where there are challenges in using digital methods or AI to handle customer service, complex queries can now be transferred to a workforce less burdened by everyday administration and paperwork. Though the immediate effect of such technology is to resolve straightforward issues swiftly, it also allows companies to provide high-level personnel support to customers who prefer not to use digital channels or where automated services aren’t appropriate for the complexity of the query.
On the other hand, the coronavirus outbreak has also prompted the need to assess potential compromises to traditional business strategies, particularly when it comes to risk.
For example, customers that entered the pandemic with a strong credit record may be in a very different position now, after three months of lockdown, as pay cuts and the looming threat of sudden redundancy remains a real concern for many. The risk of fraud in requests for forbearance or new finance is something to consider alongside helping customers who are experiencing genuine financial struggles. Payment deferrals have become standard across several industries in recent weeks; it remains to be seen what impact this will have on the market and consumer expectations in the months ahead.
In a recent seminar on the topic of operations and forbearance held by the International Asset Finance Network, Mel Chell, partner at Shoosmiths LLP, commented that ongoing communication with consumers would be a vital element of lenders’ survival through this period.
Chell explains that without this vital contact, businesses may have trouble getting in touch with consumers after payment deferrals and will need a strategy in place to communicate how and when payments are to be resumed. Lenders will have to consider a “long game” of wider mandates, concessionary options and communication strategies to offer their customers sensible decisions regarding contracts — particularly regarding options around contract termination, such as voluntary recovery, and the effect of payment deferral on future payments.
Furthermore, the ability to use data and analytics within the lending industry is increasingly under the microscope; the way lenders use this information on a real-time basis in response to these new issues will be critical to success. Embracing new technology services, such as open banking, enables a constant assessment of risk and, crucially, can facilitate anticipating customer needs proactively rather than reactively as they arise.
With the current situation remaining so dynamic, technology that provides a comprehensive means of gathering and managing data will be vital to obtaining the insights needed to adapt. Lenders must ensure they have measures in place to pre-empt evolving customer requirements, and both the technical and operational flexibility to accept a compromise of current standards if business is to remain sustainable and profitable.
Although much of the focus of a data-centric outlook is on achieving enhanced levels of customer service to retain business and minimize risks, the success of digitalization projects and technology investments often reduces costs in the long run – a bonus at present given the precarious position of the global economy.
To conclude, customer concerns over the loss of jobs and public health, as well as the forecasted imminent global recession, are likely to cull the number of new deals made throughout the remainder of 2020 and in the months to come. Competition will be fierce and, from a consumer perspective, decisions are more likely to be cost-led, particularly in the subprime space.
The ability to marry historical data with new factors will be a critical element of strategies for reaching out to customers that are currently struggling before they become delinquent. New technologies and robust contract management systems in place will mark the businesses best equipped to navigate the crisis.
Brendan Gleeson is group CEO at White Clarke Group.