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  5. Equipment Financing in N. America: Leveraging the Web

Equipment Financing in N. America: Leveraging the Web

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2002/03/13

Abstract

Whatever happened to the dream of moving equipment financing into cyberspace and its dream weavers? Most loan and lease exchanges had a nightmare. Web-based technology, however, continues to house great potential for improving equipment financing performance according to Celent Communications.

In a new report, entitled Equipment Financing in North America: Leveraging the Web, Alenka Grealish, wholesale banking analyst at Celent, examines the potential of Web-based solutions for equipment financing and trade credit. "Given its Byzantine structure, equipment financing is ripe for efficiency gains and revenue enhancement through Web-based automation. Potential cost savings for the industry overall ranges from US$700 million to US$1,000 million and for manufacturers, trade credit automation could yield up to US$1,500 million in savings," concludes Grealish.

According to Grealish, "Online origination is not where the biggest bang for the technology buck is (though it is a relatively easy place to start), rather the bang for the buck is cumulative across the numerous pieces of the financing process. Web-based technology can weave together the numerous players, systems, and data sources involved in each stage of the process, pushing financing to the point-of-sale (e.g., vendor), automating the overall workflow, and expediting credit decisioning and fulfillment."

Commenting on the demise of online loan/lease exchanges, Grealish states that: "Their nemesis was the complexity of leasing transactions, which could not be reduced to purely a price game. Moreover, equipment financing companies would not allow their product to be reduced to a commodity."

Grealish concludes with: "the solutions, which will gain the most traction, will be those that deliver not only quantifiable cost savings and cycle time reduction but also allow companies to improve revenues and customer relationships. Because the equipment financing industry is heavily relationship based, the need for high touch will never go away. To the degree that technology vendors prove that high touch can be leveraged by high tech, they will win."

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