The Future of Equipment Financing: Banks, Avoid Repeating This Mistake
European banks have lost between three percent to four percent, or €22 billion of market share to challenger mobile-only banks such as N26 and Revolut because they did not develop new, customer-centric, and data-driven approaches to personalized banking.
22 big bs is a substantial amount of money lost because of retail banking’s failure to innovate quickly and to meet the evolving demands of the modern-day customer.
I see a similar trend quickly approaching commercial banking as IoT’s involvement in the financial sector reaches a whopping $2.1 billion by 2023, at a compound annual growth rate of 52.1% YOY.
Yet while the financial sector screams for aggressive IoT adoption, they fall short of one critical aspect that stifles their successful transition.
Banks do not possess the deep IoT and data-standardization know-how required to efficiently and securely process equipment usage data.
These institutions have tried to develop a data-driven financing solution, but the majority struggle because they just can’t seem to get all the moving parts properly aligned.
They face scalability issues of retrieving, understanding, and applying data to create actionable outcomes.
It makes sense that Microsoft’s 2019 IoT signal’s report discovered that 38% of their respondents stated that the top challenge for IoT adoption is complexity or technical challenges since there’s a lack of industry expertise.
So, what does this mean for your financial organization?
Banks who struggle to adopt the latest technology, like IoT and data, will end up failing in bringing more flexible and customer-focused financing products in the market and will again lose further market share.
We see a bold and bright opportunity for Linxfour to help such institutions navigate the trenches of data management.
We want to help banks, insurance companies, and other financial groups protect their corporate financing market share with tailor-made equipment financing solutions that combat traditional financing’s pitfalls.
Why does traditional financing suck?
Because it posses glaring weaknesses in terms of payment flexibility, cash flow optimization, and risk-sharing opportunities, to name a few.
Conventional methods prevent equipment seeker’s from buying machinery because it requires hefty upfront investments.
On top of that, buyers can’t distribute the cash damage incurred from direct purchases to coincide with money coming into the business.
Not to mention that the shift in buyer-seller risk is entirely unfair for those manufacturers who purchase new machinery out-right.
Traditional financing is out-dated and is not designed to meet the expectations of buyers today.
How can you optimize your equipment financing strategies?
Begin by asking your customers what they want.
We’ve gone ahead, leveraging our 15 years of IoT expertise and direct interactions with numerous OEMs to realize that the market demand is currently high for more flexible financing options in the industry.
OEMs are requesting such services since other pay-per-use services now pamper their customers, and thus no longer see the value of undergoing risk-sharing and financial hardships.
Look, for example, at Daimler Mobility and Hyundai, two leading automotive OEMs who envision a massive shift in how the heavy-duty truck industry will operate in the future.
Both companies have rolled out pay-per-use leasing initiatives to combat truck sales, reaching their lowest level in nine years.
These service models are accompanied by usage-based financing methods that allow OEMs to receive their full sale amount while purchasers enjoy flexible payment options.
How Linxfour can help?
Linxfour’s platform connects industry 4.0 and finance to enable scalable financial and data-driven products that allow banks and financial institutions to be quick to market.
We take care of the equipment usage data collection and bring it to our platform to generate financial insights like repayment rates, pay-per-use calculations, and contract durations, to name a few.
We can invoice machine users or send them information directly through simple interfaces, allowing all participating parties to view the aggregated data.
We then analyze the data and provide the banks with valuable equipment insights such as:
how the machine is used
when will clients reach their break-even points
the risks associated with reaching break-even points
By having such management tools, client managers can source issues in advance and communicate with borrowers to overcome any credit default risks.
Not to mention that if a client is doing well, they can pay off their debts quicker.
Linxfour's technical solution
Linxfour’s internal smart contract and IoT infrastructure can enable, on the one hand, pay-per-use financing to deliver invaluable insights for financial lenders. With our smart contract technology, we can create new efficiencies through automated, scalable, and tailor-made financial products.
Our platform:
Saves you time - It takes financial institutions two years to implement an equivalent system to that of Linxfour.
Is easy to use - Linxfour handles all the technical data.
Is ready to use - Linxfour platform is ready to implement usage-based financing immediately.
The future of Linxfour
We envision Linxfour as a deal flow network where we match equipment builders with financial partners so that anyone can sign up to our platform and can request equipment financing.
It would work something like this.
We would specialize in calculating the price per unit produced and provide contracts with a specified time duration.
Then, our financing partners get a notification to choose whether or not they want to finance that particular project.
In summary, this whole process acts as a new sales funnel for financial partners to get access to previously untapped deal flow.
Final Thoughts
Overall, the future looks bright for those financial institutions that are ready to change their traditional ways. It’s time to push more tailor-made solutions and to meet the evolving demands of existing and new customers.
About Linxfour
Linxfour is a European leasing company, based in Austria, providing Pay-per-Use financing solutions to manufacturing companies. Using proprietary IIoT (Industrial Internet of Things) technology and AI-driven risk management, we are unique in underwriting true utilisation risk. Operating across different countries and industries, we are committed to helping businesses finance equipment with our unparalleled solution.
Linxfour: Transforming Equipment Finance
