Leasing was born of innovation. A surge of
entrepreneurs, backed by banks, persuaded customers of the
advantages of concentrating on the productivity of assets, and not
their ownership.
When price premiums began to dip,
the wave of consolidation which swept the industry brought with it
creativity. Real advances were made in the design and efficiency of
back and middle offices, creating process efficiencies where they
had not existed, and systematising large-scale underwriting.
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Most recently, funding structures
to exploit cheaper debt were certainly clever, even though they
allowed us to forget how to make real money by selling. So leasing
has shown an aptitude for innovation. But it has become too
narrowly focused on cost reduction and funding, rather than
service, data handling, and organisational structure.
At present the sector has an
unprecedented opportunity to take market share from bank loans, and
to do so at higher margins. But we can not persuade our
shareholders to invest in expansion because the business model is
simply not profitable enough.
After two decades of consolidation,
our multiple technology platforms cannot process our data fast
enough and we have a product that is so bland that we make sales
only by paying relationship managers to bring customers to us,
rather than having a product that stimulates customer appetite more
directly.
Innovation is vital because – if
our barriers to entry are funding, technology and embedded customer
base – there are new banks emerging from Brazil, China and Mexico
that have cheaper funding, a domestic customer base that is larger
than ours, and an ability to leapfrog to cheaper, more flexible
technology.
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By GlobalDataWhich technology profile will
underpin the successful large scale leasing company in 2020? One
that is still wrestling with multiple platforms each 10 to 20 years
old, or one that is using the latest modular programming,
multifunctional and interactive customer interfaces, mobile
applications and real-time data?
The barriers to entry in leasing
built by the current players are crumbling. Innovation is needed in
key areas to reinforce our position and to make us profitable and
competitive for the next decade.
First, we must update our
technology and data handling skills. Second, we must use technology
to design products and services that customers and vendors get from
us, and not the intermediary. Finally, we must redesign our
organisations to reflect the real contribution of roles,
structuring remuneration in line with how profit is actually
earned.
This across-the-board innovation could be funded by increasing
our share of the credit market. A senior member of the core
leadership team will need to be a marketing director.
