Three technologies hold promise for equipment finance firms looking to raise their quality of products and services while reducing costs, according to a study by the Equipment Leasing and Financing Foundation. They are artificial intelligence, blockchain and smart contracts. Both the leasing companies and their customers will benefit from early adoption of these technologies.
Rural Lifestyle Dealer discussed these technologies and the potential impact on the rural equipment market with two directors for the technology consulting company Capgemini, Jeff Boots and Roderick Wilkins. At Capgemini, they work with technology platforms and companies to provide solutions to consumers and manufacturers. Both are focused on looking to the future and delivering new visions.
Rural Lifestyle Dealer: The three technologies that you have looked at are artificial intelligence, blockchain and smart contracts. Can you provide an overview of these technologies, how they're being used now and what their advantages would be for customers and for dealers?
Jeff Boots: Let's start with artificial intelligence. People still probably associate artificial intelligence with robots. In reality, it's very easy to bring that technology forward to what people are experiencing now, such as “chatbots.” (Chatbots are computer programs designed to communicate with humans over the internet).
There are a couple of components to this technology. One is programmatic and the other is cognitive. Within the cognitive aspect, that's where we're finally seeing finance companies harness artificial intelligence. By using the power of the data, they are able to present solutions to their customers based on information that they already know, such as what the customer has been able to afford in the past. Through marketing or other communication, finance companies and dealers can get in front of them before they even think about calling or looking to others.
Roderick Wilkins: Part of what we see for the future is a combination of what the finance company knows and what the dealer knows. The dealer will know the sort of equipment and the sort of issues that the prospect is going to face and the equipment to match those needs. The finance company will know about credit histories. Traditionally, finance companies and dealers were looking at customers in fairly large scale groups. That's not the case anymore. What you're looking at is a future world where people are literally a market of one.
To be successful, dealers and equipment financiers will need to hook up using these technologies, reviewing the data they've assembled over the years and configure it in a way that identifies a customer’s individual characteristics.
Listen to the RLD podcast episode: What Smart Technology for Financing is & Why Dealers Need it.
RLD: Can you explain what smart contracts are and what the technology means for dealers?
Wilkins: A smart contract is just a contract where the basic terms are agreed upon by the people involved. So, let's say that you have dealers and equipment financiers, and they are well used to each other. They understand what each other's needs are in terms of the way that a financial product is marketed and can agree in advance on certain terms.
This contract doesn’t need to be reduced to writing, but can be a virtual contract.
It can be presented online to a lessee, to a farmer, or a user in that community and it can be signed online and need never reduced to paper because it's smart, everybody knows what the terms and conditions are.
We are hoping to persuade the Equipment Leasing and Finance Assn. to set up a body like the mortgage industry did many years ag, called MISMO (Mortgage Industry Standards Maintenance Organization). MISMO sets standards that have allowed the mortgage industry to create smart contracts, which the leasing industry hasn't yet got to.
RLD: So, some kinds of artificial intelligence are already happening in the equipment sector. What about blockchains? What is needed for that technology to occur for the leasing industry?
Wilkins: Public blockchains have gotten a fairly bad reputation because of their connection to Bitcoin — that they are big and complex and full of risk. However, the parts of blockchain that have begun to work are those private, consortium-type blockchains, where a small group agrees to specific standards and then the transaction is uploaded into their blockchain.
The reason the financing industry requires intermediaries is because we want to make quite certain that terms and conditions are agreed upon and in place before money changes hands. What a blockchain does is replace the banker. As the transaction is loaded, the blockchain looks the events that have occurred and because we have all agreed to abide by the terms of the blockchain, money can be exchanged without the need to go through a banker.
Now, that's begun to happen in a number of different places, primarily in the banking market. If we look at a rural dealer, what that would mean is instead of the transaction going through a series of banks, it could be done immediately on a blockchain instead of taking hours to go through the ACH (Automated Clearing House) system.
Continue on to Part 2 of How Smart Technologies can Improve Equipment Financing