Fintech Innovation in Equipment Finance:
Early Days, But Not For Long
Dispatches from the CEMC Innovation Summit
By Patricia M. Voorhees
The Alta Group, director and Fintech equipment finance consultant
Fintech companies, platforms and strategies are in the early stages of changing equipment finance but the potential for significant innovation is moving closer to reality, judging from the recent Commercial Equipment Marketplace Council (CEMC) Innovation Summit.
The summit in Laguna Beach, California, attracted a crowd of 100+ multigenerational and diverse professionals – more than double the number of participants at the CEMC Roundtable late last year. Companies with a stake in the digitization of asset purchase and finance attended including capital providers, online sellers and lenders, equipment finance organizations, and technology and data businesses.
In addition to innovation strategies from business speakers including Peter Guber, who had just hours before celebrated an NBA championship as co-owner of the Golden State Warriors, the summit covered the digitization of asset finance, re-designing the buying process, the role of man and machine learning/artificial intelligence, and the future of blockchain in the industry. The role that data is playing in driving equipment finance innovation was a common theme of many summit speakers.
“Historically there has been a lot of talk about Fintech playing a role in the future of equipment leasing and financing. Now, this is actually starting to move into the execution phase,” observed John C. Deane, CEO of The Alta Group equipment finance consultancy, following the event.
Banks see opportunities with Fintechs, as well. Independent Banker magazine in June reported that community banks are looking to partner with Fintechs, as they observe that small-business owners are trending younger. “They’ll expect the same technological capabilities from community banks’ services as they do in other parts of their business and personal lives,” the article noted. Banks have the deposit and other ancillary financial products that pure Fintech providers don’t offer, it pointed out.
The CEMC summit illustrated the need to bridge the knowledge gap for Fintech owners and professionals who lack experience in equipment leasing and lending practices, and for equipment finance professionals who can learn from Fintech. It is clear that growing demand for financing integrated at point of sale is cementing the need for mobile technology enabled solutions.
CEMC was founded in 2016 by Currency’s Charles Anderson and Alta to provide a forum for executives to discuss the digitization of asset finance. The Innovation Summit held June 12-14 was CEMC’s third event and the first focused on innovation. A December roundtable event is planned in New York City.
Asset Finance Digitization
I had the pleasure of serving as moderator of the Digitization of Asset Finance and Purchase session. Our goal was to give attendees insight into the challenges and opportunities that Fintech models offer in asset finance and lay the groundwork for sessions later that day.
A major takeaway from our session: while the equipment leasing market is in the early days of Fintech innovation, it is poised to be transformed by newer, disruptive models in which data can fuel better credit decisions, more products, end-to-end technology enabled processes, and the strengthening of asset performance – all critical to a growing, sustainable market. Some points made during our discussion follow.
• Peter Renton of LendIt began his career in the printing business and has a keen understanding of assets from a small business perspective. He discussed Fintech’s current inroads in asset finance and the potential for innovation. He also outlined for existing leasing company executives the advantages and disadvantages of partnering with Fintech providers and how these are different from those for unsecured SMB lenders.
• Bill Phelan of PayNet stressed that in order to create a sustainable credit market for small-to-medium businesses, finance companies must use data effectively to grow in the industry. He touched on a few examples of Fintechs that have failed or faltered despite hopes that these small business lenders would fill the credit gap through credit cycles.
• Anu Sachdeva of Genpact focused on shifting client expectations and how end-to-end process innovation – “disruptive value creation” – can give businesses the biggest bang for their technology spend. Her chart below estimates the improvements in productivity, accuracy, compliance, cost savings, and auto cash application rates that can result.
• Matthew Perkins of Guggenheim Securities looked at what is happening in the financial markets with Fintech, equipment leasing, and asset classes. He drew connections between seemingly unrelated economic events such as the fact that the reduction in oil prices has increased demand for specialty finance assets. He also noted the strength of the equipment asset class and that only US treasuries have performed better in the capital markets.
• I pointed out during the session that the market appetite for Fintech is increasing investor interest but with that will come the need for technology that provides more data on assets and asset performance to attract sustaining investors.
Data was a theme throughout the rest of the day, too, inspiring attendees to consider the “so what?” of technology to make products that resonate with clients.
One interesting session was a design workshop focused on “re-architecting” the digitization of the buying process. The workshop was led by Jason Mayden, CEO of Super Heroic Inc. and designer of Nike Air Jordan athletic shoes. He believes data is a medium that is critical to design because it helps tell a story. He also believes in spending ample time with the product and observing customer interactions during the design process, as he did when following Michael Jordan around while designing the Nike Air Jordan.
Two insightful panels followed the design workshop. One delved into Man & Machine Learning/AI with Christine Robson of Google, Justin B. Dickerson of Data Robot, Venkat Srinivasan of Rage Frameworks and Deborah Reuben of Reuben Creative as moderator. The other explored the New Age of Blockchain with Christina Dolan of insideCHAINS, Wayne Super of Cisco Corporation and Anoop Nanra of Cisco.
Summit Speakers & Sponsors
The summit also highlighted the innovation strategies of well-known business speakers. Jeffrey Hayzlett, television host of “C-Suite with Jeffrey Hayzlett” and “Executive Perspectives” on C-Suite TV and a podcast host, addressed the Power of Innovation and Disruption during the summit kickoff.
Keynote Speaker Peter Guber, briefly mentioned earlier, is CEO of Mandalay Entertainment and is co-owner of both the Golden State Warriors and Los Angeles Dodgers. He urged attendees to encourage innovation in their businesses by challenging their incumbency, in other words their own market leadership.
Keynote Speaker Mitch Jacobs, founder of OnDeck Capital, discussed Crossing the Chasm in Our Industry – The Old to New Way of Doing Business, stressing the importance of Fintech’s part in supplying information and critical financing for equipment for small business.
Other summit speakers included Colin Angus (National Geographic Adventurer of the Year), Sen. Mike Lee (R-UT), and CEMC Founder Charles Anderson.
Sponsors of the first annual CEMC Innovation Summit were: Currency (Founding Sponsor), PayNet (Gold Sponsor), Genpact and The Alta Group (Silver Sponsors), and HCTV, Columbia University, Stanford University, Katten, and LendIt (Contributing Sponsors).
There was a palpable, positive energy at the summit about the opportunities Fintech innovation is leading in our industry. Participants I spoke with felt the summit was well worth the time spent and left the sessions energized about what they had learned and eager to participate in further CEMC events. For my part, I came away convinced of what an exciting time it is in our industry now, in these early days of fast-paced change and innovation that will enable better, broader solutions in equipment finance.
About the Author: Patricia M. Voorhees is a director of The Alta Group equipment finance consultancy with Fintech expertise. She can be reached at 203 770 3084 or firstname.lastname@example.org.
The Alta Group provides consulting and M&A Advisory to growing Fintech companies and equipment leasing and finance firms wishing to connect and match needs for new business channel development, funding and learning at the intersection of technology and commercial equipment acquisition. For more information and industry resources visit thealtagroup.com/fintech-services/ or contact Patricia M. Voorhees at 203 770 3084 email@example.com.