Some 15 years ago, retail banking customers were still tied to their high street branch, businesses made payments via cheque and internet banking was struggling to capture consumer interest. Today most consumers manage their banking without ever setting foot in a physical branch and the fintech app economy means customers expect tailored experiences that are both instant and accessible. In the automotive finance sector though, we should be grateful that a similar degree of disruption hasn’t yet materialised.
If it had, I believe a number of the major players in our sector would have been frankly unprepared.
Automotive finance industry failings
Whilst the automotive industry continues to attract acclaim for its engineering innovation, the sector’s finance arm has yet to find solutions to evolving consumer preferences. The systems and behaviours employed across automotive finance are largely the same as those of 15years ago. Yet customer expectations have evolved as they’ve seen tailored, more accessible experiences enter other aspects of their lives. So we need a more innovative approach towards the holistic customer experience.
This is not for lack of effort. Time, money and research has been poured into addressing the industry’s big challenges and in the case of declining ownership in urban areas, for example, programmes such as BMW’s DriveNow has made vehicle access more flexible in the London area. Yet sometimes these types of initiatives are too often developed in isolation, making it difficult for a culture of innovation to permeate a business and impact the wider customer experience.
Enter the startups
The solution to many of automotive finance’s challenges lies, somewhat ironically, in working with the same groups that are driving change around car ownership: the young, urban entrepreneurs in startup clusters such as Tech City. And startups are adept at not just finding solutions to industry-wide problems, but often rephrasing the question entirely.
Rather than focusing on how we can tackle declining car ownership in urban areas by making cars more accessible, we must ask how we change the concept of car ownership itself, from product to package. For example, instead of looking at how to reduce insurance costs for consumers, why not question whether the current insurance model is suitable for all modern drivers?
These thoughts already exist within the automotive finance sector, but by working hand-in-hand with startups the major players can bring these to life via the same fresh thinking, creativity and cutting-edge technology that has turned the wider financial services industry on its head.
Disruption in auto finance is inevitable and I believe that by collaborating with startups has a key part to play in successfully innovating in this space. At BMW Financial Services UK we’ve launched our inaugural corporate accelerator, the Innovation Lab, with this in mind. We recognised the programme would be wholly ineffective unless we were completely open and honest about the barriers we face, where we are yet to act, as well as our long-term objectives. We’re currently midway through the programme and our five startups have already had a tremendous impact on the company’s mindset.
Corporates must offer startups tangible benefits from collaboration, beyond simply providing a logo for the website.
A brighter future – together
Big businesses that have suffered most from fintech’s disruption should serve as a stark warning to others: failure to genuinely innovate and adapt ahead of disruption will impact your bottom line. General consumer expectations around personalised, flexible and accessible experiences have evolved. Businesses that fail to keep pace with customer behaviour will see sales suffer. It’s as simple as that.
Unless we in the automotive finance industry openly acknowledge that we do not have all the answers, we face being left behind as well. We need to reach out to the same disruptive startups that could one day pose a threat, and help each other deliver the best solutions for consumers.
Disruption is coming to auto finance, and we must make inroads with the startup community now. If not, the industry’s big players face falling behind the fresh, agile companies that will inevitably offer faster, easier and more tailored customer experiences.
Mike Dennett is CEO of BMW Group Financial Services UK.