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“If we had computers that knew everything there was to know about things – using data they gathered without any help from us – we would be able to track and count everything, and greatly reduce waste, loss and cost. We would know when things needed replacing, repairing or recalling, and whether they were fresh or past their best.” – Kevin Ashton, Internet of Things (IoT) Innovator.
Imagine being able to control all of the valuable assets you own. Those seen and rarely seen. Those used and never used. Imagine knowing how and when those assets are being used, and taking comfort in knowing their condition, that they are being maintained and that your investment in their future value is being protected.
Until recently, that knowledge and control has been somewhat lacking in the auto and equipment finance industry. However, with the current acceleration of connectivity and machine-to-machine communications, a change is underway. Auto and equipment finance companies are about to benefit greatly, enabling more informed decision-making and reduced risk.
Intel estimates there will be 200 billion devices connected to the internet by 2020. That’s 26 smart devices for every human being on earth. There has been a large increase in smart devices within homes, and this trend will continue to expand across a wider scope – creating never-before-realized efficiencies in the auto and equipment sector.
On the roads, cars are offering ever-increasing levels of connectivity. It’s estimated that 250 million cars will be connected to the internet by 2020. The ability to program and control fully automated, driverless cars using IoT technology is soon expected to positively disrupt the automobile industry.
Individual ownership of cars could be replaced by subscription models, allowing groups to own or lease vehicles together. IoT will enable the tracing of usage and mileage for group vehicles, automatically monitoring accurately scaled subscription rates.
IoT also appears to be on the cusp of changing car loan underwriting practices. Currently, many auto manufacturers are content to own the data provided by their cars' onboard sensors. However, it’s likely that in the future, customers will own the data on their own driving habits. They will be able to share this data with banks and insurance companies to shop the best rates. Likewise, the information will help underwriters better assess risk profiles before onboarding potential new customers.
Pay-per-use subscription models are not new to equipment finance, particularly IT equipment. However, with increased connectivity, more auto and equipment firms will be adopting these models in the future.
Two car manufacturers have already launched a subscription model, which rolls up the cost of use, insurance, maintenance and breakdown coverage into one monthly payment, with no long-term financing commitments or down payments attached.
An expansion of this pay-as-you-drive model features variable monthly payments based on actual vehicle usage; the more you drive the more you pay. This model would help corporations align costs to income and give consumers control over their true cost of driving.
The fact is data sensors on any type of equipment can be used to support pay-per-use subscriptions. Data captured can help to reduce downtime, save energy and increase revenue using IoT-based solutions. The impact on the equipment finance industry is clear and far-reaching.
IoT Combined with Other Disruptive Technologies
IoT will dovetail with other disruptive technologies to change the auto and equipment finance industry in other important ways:
Blockchain – Know Your Customer (KYC) programs will become almost fully automated. Smart contracts will govern and self-execute transactions, reducing costs and increasing efficiencies.
Machine Learning (ML) and Artificial Intelligence (AI) – Auto-decisioning will improve, leading to greater confidence in systems and more and bigger deals and transactions being decided by computers. Add into the mix better knowledge of asset behavior, and the role of the credit team could change dramatically.
Robotics Process Automation (RPA) – Alone, RPA can automate mundane tasks and rule-based processes, but when paired with other technologies, it can do much more. If a process is not structured, has high complexity and exception rates, or involves big data, then AI can be employed with it to manage greater variability.
The aim of most companies is to reduce cost, increase efficiency and maximize profit; staying ahead of the competition is of paramount importance. Straight-through processing can help achieve these goals, wherein automation is central to reducing manual processes and workarounds, simultaneously reducing operational risks and strengthening internal controls. The use of RPA will play a major part in enabling straight-through processing, leading more auto and finance companies to become mean and lean in the years ahead.
Efficient KYC Processing
KYC rules require banks to verify a new customer's identity, legitimacy of funds, context of transactions and evaluate money laundering risks. However, KYC-related due diligence and investigation can take months.
Slow, inefficient KYC processes can make it difficult for financial institutions and customers to collaborate in areas ranging from large auto and equipment financing to currency exchange conversion rates. Blockchain technology may make it quicker and easier to share verified KYC information, so these companies can work together faster and gain value from new relationships sooner.
A Brave New World Awaits
As the world becomes more connected each day, many new technologies will change the auto and equipment finance industry for years to come. Processes will become automated, many efficiencies will be found and some of the traditional roles of the lessor will change or diminish dramatically.
These new technologies will usher in new industry challengers. Take note and get ready to rise. Early adopters that lead the way into this new-look industry will stand to reap the benefits sooner than later.
Omitted from the framework is any mention of changing 401(K) plan contributions to after-tax roth contributions, either in whole or in part."
I don�t think anyone wakes up in the morning, and brushes their teeth, thinking about merchant processing. But the team at FIS does."
It has been estimated that �Rothification� of contributions could raise more than $600 billion over 10 years. The estimate is suspect, however, because it does not consider the future loss of tax revenue when Roth amounts are withdrawn from plans tax free. Earlier tax reform proposals included Rothification provisions that were broadly opposed by the retirement plan community and many key members in Congress. Sixteen Democrats in Congress recently sent a letter to the Big Six urging them to resist using Rothification as a revenue raiser. While it currently seems that such an approach is off the table, tax reform is tricky business and will be full of twists and turns as it proceeds. The current political environment is unpredictable and if you thought health care reform was complicated, this endeavor may make it look like child�s play.