IF you can buy bread and milk via an app and music and films via Spotify or Netflix, what about a car?
Back in 2014 Bob Jones – originally an ex Liverpool Lombard finance rep – launched Blue Motor Finance (BMF). BMF part-relies on algorithms to help make rapid underwriting decisions, stripping out, Jones told the Financial Times earlier this year, “as much friction as possible”.
“You can walk into a dealership and at the fastest level you can walk out with a car 20 minutes later,” he added. Jones’ business has now lent more than £1bn, spurred by low interest rates as well as low levels of defaults (though where we are in the economic cycle is up for argument).
Profits are said to be in the ‘seven figure mark’ with much cost wrung out by tight recruitment and a geographically unfashionable base (Kent), well away from East London’s ‘silicon valley’.
Much of Blue Motor Finance’s field force have been coaxed away from big name motor finance houses, helping speed new business.
Room to move?
So what’s the growth potential for fintech-powered car finance? In the 12 months to September 2019 UK Finance & Leasing Association (FLA) members funded £46.7bn to businesses and consumers for cars. Consumers took £37.7bn at point of sale – £19.5bn for new vehicles and £18.2bn for used.
The total amount of annual UK vehicle sales is worth closer to £100bn. So provided UK economic confidence holds there’s room for both minnows – i.e. fintech – and legacy players to expand respective market share.
Much of the day-to-day business nuts and bolts – moving cars and people about – hasn’t changed. So how ‘new’ is fintech in this space?
Shiny but not so ‘new’
“You can’t be a 20-year-old business operating a fleet of 140,000 vehicles [in the UK] and not also operate and learn from fintech as well as bring your own development to market,” Alphabet communications manger David Jones told Business Car Manager.
Leo Taylor, Head of Product Management at Alphabet UK, agrees. He claims Alphabet is a fintech lease player already. “We see ourselves as a fintech. That might sound strange and Alphabet is a big company in its own right.”
Both claim that working with BMW Group’s Innovation Lab – where fintech ideas are explored and collaborated with smaller fintech players – is energising the business (a fintech corporate quoting and ordering tool was recently piloted).
Back yard talent
Taylor adds that fintech talent is also bending product development schedules. “The pace of change…projects that may have before looked a two-year approach actually…now get delivered in a few weeks or a few months.”
Nor is the co-operation one-way. “Clearly there are things we can learn from fintech: the way they operate, they way they think.
“But if you are a fintech and a business and you want that scaleability, as most of them do, then you have to make sure you’ve a sustainable business…and do things in the right way.”
Especially on the regulation front where newer digital businesses could be more exposed. If regulators were to start digging into data catch-up – issues around client money protection or risk of theft, for example – and the tech can’t reliably respond, then what?
Not all fintech operators have the deeper pockets of the legacy competition.
And while some fintech offerings look cutting edge, the disruptive pressure to be ahead on multiple fronts, seen and unseen, is relentless.
Fintech absorbs not just finance but operations, risk management and infrastructure. For connected consumers it’s here to stay. But it’s how fintech connects that will separate success from failure.
Is fintech the driver’s friend?
Yes, if it makes goods and services faster, more convenient and simpler to understand and operate. For millennials and Generation Z (those born since 1997) the technology is often perceived as more trustworthy than mainstream banks as well as more socially responsible.
But there has yet to be a fintech financial crisis that damages its underlying integrity.
By their nature fintech operations are more vulnerable to cyber attack. They also have to work harder to keep customer loyalty. Online digitised platforms are easy to join as they are easy to quit.
