Automotive Captive Transformation - Implementing Fintech in a Legacy World
Captive automotive financial services companies (or “captives”) are almost exclusively focused on supporting the purchase or lease of their parent Original Equipment Manufacturer (OEM) products. This laser focus can provide many advantages with processes geared toward the purchase or lease, brand-specific incentives, and convenient point-of-sale customer experience. This has historically created significantly higher customer brand loyalty. However, this loyalty advantage has been under pressure as digital tools have enabled customers to cross shop not only the brands but also alternative financing options more easily before heading to the dealership
The need for change is undeniable. Amid the evolving stakeholder expectations, customers expect the “Amazonian” experience: “Point, click, and deliver in real time”. In many cases, many reliable legacy IT systems struggle to support the rapid changes needed for a successful digital transformation. These older systems are often unable to deliver the seamless experiences that customers require. Integrating these legacy systems with modern platforms is hindered by differences in architecture, data formats, and protocols. These systems may even pre-date the internet!
Captive automotive financial services companies encounter many of the same challenges as any entity looking to modernize their infrastructure to meet evolving customer, employee, and regulatory requirements. These include intense competition for resources, both financial and human, integration with multiple third parties and evolving customer demands for a fully digital, frictionless, and coordinated experience. The legacy systems often struggle with real-time processing along with years of tactical fixes, manual reporting, and information gaps that make end-to-end customer experiences impossible. Change control backlogs are deep and complex to implement, lacking a robust test environment reflecting actual production. These systems also prioritize evolving regulatory requirements over experience improvements, creating unmanageable technical debt.
On the employee side, user complexity creates inefficient training and onboarding and inhibits optimized staffing. There are instances of users needing to access up to seven distinct systems to provide customer service during a single contact. Adding to this complexity are the unique requirements of the indirect lending model and the cyclical nature of the automotive marketplace.
The Imperative of a Digital Experience
Digital engagement is key to customer advocacy, with brand promoters significantly more likely to use the lender’s digital channels to view billing statements, make payments, and receive account alerts. Also, one of the key hurdles to greater digital use is concerns about personal data use and protection. Real-time engagement is inherent in these experiences.
A telling example of the limitations of many legacy systems can be seen in the area of payments, making online payments is a key driver of customer satisfaction. Customers expect to see the transaction happen, a debit from their bank and a credit to their automotive account. Today, most customers will see the debit immediately from their bank, however, it will likely take a business day or more before they see the payment credit to their automotive account. This fundamentally breaks the customer experience, forming the core to their interaction with the captive finance company. There are other examples of overcoming system-to-system communication gaps with Excel workbooks and other manual processes. But these are more costly, can introduce security issues, and may be less accurate, leading to poor customer and employee satisfaction.
The opportunities for modern solutions to accelerate digital transformation in the automotive captive space are countless. Some of the use cases of digital in this industry are:
- AI and Machine Learning could create more efficient and improved onboarding, real-time coaching, predictive call handling, and proliferation of customer and employee self-service options.
- Intelligent process automation could create more efficient and controlled processes and close the gaps created by a tangled web of legacy systems.
- GenAI can help simplify & summarize multi-page contracts and offer pointed responses to customers via a chatbot.
- Machine Learning could help analyze customer patterns and identify fraud.
The opportunities are endless.
Conclusion
The captive automotive financing industry is of vital importance to their OEM and meeting the evolving expectations of customers, partners, and employees is key to their continued success. The path to fully digital transformation has many challenges, but with a long-term, digital-first, customer-first strategy, the captive financial services companies will continue to drive value to their OEM parents.
