Auto finance companies need to develop a much deeper understanding of their customers if they are to successfully launch new services that meet changing demands.
Although processes such as ‘Know Your Customer’ provide valuable insight to avoid fraud and ensure affordability of loans, they don’t go far enough in understanding the nuances that indicate changing customer expectations when it comes to the finance products they use.
Without this insight, established finance providers face losing market share to disruptive competitors that are focused on getting closer to customers and offering innovative products that are more flexible and personalised.
Graeme Banister, an independent specialist in mobility issues, recently told finance executives: “As car finance companies, you know about ‘KYC – Know Your Customer’. I challenge all car finance companies, because you don’t actually know a lot about your customers.”
A finance provider might know a customer’s address, income level and details of their finance arrangement, such as term and mileage.
But with increasing consumer interest in mobility services, Banister is concerned this doesn’t go far enough, as it provides little insight into customer requirements.
He said: “Mobility services is about a lot more. You need to know how that car is being driven, potentially through telematics. You need to know when the car is being driven, what is the purpose of that trip and who is actually on the trip.”
Banister was speaking to delegates at the International Auto Finance Network conference and you can watch key points from his presentation in this video provided courtesy of White Clarke Group – the world leading provider of end-to-end finance software.
When suppliers get closer to their customers, it drives new innovations as companies think differently about the way they provide finance, particularly when it comes to flexibility.
For example, Canvas in the US has taken lessons from mobile phone contracts and applied them to car finance. Instead of minutes, customers pay for miles, which they use as required during the month, or they can roll unused miles over to the next month.
This level of flexibility is the type of innovation customers are looking for and it can only be delivered though a closer understanding of their requirements.
“There are new rules, there are new brands and I fear a little bit for traditional car finance companies because I don’t see where you’re delivering the innovation,” warns Banister.
Customer loyalty is important to maintaining profitability, so offering new services and innovations that customers need is vital.
The key is ensuring relationships go beyond Know Your Customer to drive better understanding of customer needs to inspire products and services fit for a new era in auto finance.