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Can a subscription-based-model drive sustainable growth for auto finance?

Pay-per-use (PPU) business models are fast gaining ground in asset finance, especially for the leasing of commercial equipment and vehicles. But to date, automotive subscriptions have been slower to grow market share in the consumer space. Now, is the pace of change about to accelerate in auto finance?

Understandably, auto finance providers have been previously reluctant to jump from years of experience in managing credit risk to navigating the less familiar utilization risks that come with PPU.

However, with well-targeted marketing, the signs are that auto subscriptions could provide major opportunities for growth and profitability – not least because they encourage retention.

Rather than competing mainly on price like traditional finance products, PPU trades on the value it adds as a service. In auto finance, that makes it less about the car and more about the package of benefits the finance provider can offer the consumer.

As a result, PPU is a lot “stickier” than, say, personal contract purchase or full-service leasing – and can add considerably to your armory of product options when those deals reach the end of their term.

It’s this stickiness which can help drive sustainable growth by incrementally increasing sales. But that growth can also be sustainable in another, more modern sense – by protecting the environment along the way.

At heart, PPU helps finance providers and their customers embrace the environmental (E) part of environmental, social and governance (ESG) principles. It’s all about sharing instead of owning, re-using and not wasting – sustainable consumption in a circular economy.

So, by adding PPU to their portfolio, auto finance firms are also better placed to meet the needs of the greener, more responsible consumers of the future.

At FIS, we’re committed to helping our own clients – from seasoned finance providers to greenfield startups – adapt their systems for the next generation of retail and business customers.

Although many core asset finance processes may need no adjustment at all for managing PPU, we’ve developed our systems to enable the shift to a sustainability-conscious, service-oriented leasing environment.

For example, as PPU grows in popularity, more auto finance providers will need both a single, holistic view of each of their customers and a detailed view of who has leased each vehicle and the revenue it provides.

After years of managing one customer using one car for a set duration, it’s a change of approach that modern modular asset finance technology can support for auto finance firms. And for long-term, ESG-friendly growth, it looks like a move worth making.


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