Car dealers today face a growing array of new systems and capabilities. These are primarily in F&I, thanks to disruptive new entrants in financial technology – fintech, for short. Mark Rappaport has a nice roundup here, from a lender’s perspective, and I maintain a list on Twitter.
- AutoFi – Auto finance plug-in for dealer web sites. See Ricart Ford for an example.
- AutoGravity – Customer obtains financing (via smart phone) before visiting the dealership.
- Drive – Online car selling, with delivery, from the Drive web site.
- Honcker – Customer obtains financing (via smart phone) and they deliver the car.
- Roadster – E-commerce platform for dealers, with full sales capability (as I anticipated here).
- TrueCar – Customer sets transaction price (via smart phone) before visiting the dealership.
The new entrants blur familiar boundaries in the retail process. They’re basically lead providers, but all aim to claim a piece of the F&I process. AutoGravity, for instance, provides a lead already committed to a finance source. TrueCar provides a lead already committed to a transaction price. If you’re unfamiliar with the canonical process, see my schematics here and here.
In my previous Megatrends installment, Consolidation, I cited the influence of PE money. It’s the same with fintech. AutoGravity, to name one, is backed by $50 million.
The new F&I space is also home to “predictive analytics.” Automotive Mastermind examines thousands of data points, to produce a single likely-to-buy score. Similarly, Darwin Automotive can tell you which protection products to pitch.
The technology’s proprietary algorithm crunches thousands of data points, combining DMS information with … social media, financial, product and customer lifecycle information
My specialty is F&I, but it seems pretty clear that predictive analytics has a place in fixed ops as well. In terms of the earlier article, you can see that consolidators have an edge in evaluating new technology. Speaking of fixed ops, they’re also better positioned to obtain telematics data.
McKinsey says fintech can help incumbents, not just disrupt them. That’s why I have focused on technologies a dealer could employ, versus apps like Blinker that are straight threats. Of course, you have to adopt the technology. Marguerite Watanabe draws a parallel with the development of credit aggregation systems.
Fintech will induce dealers to adopt an online, customer-driven process. I see this as an opportunity. On the other hand, those that fail to adapt will be left behind. This article is aimed at dealers, but the challenge applies equally to lenders, product providers, and software vendors.
Virag Consulting 