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Captive finance: It’s time to go all-in on digital

Michelle Garcia,
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The COVID-19 pandemic upended the way people work, shop, and socialize, shifting in-person activities online and forcing businesses to swiftly pivot to digital-first engagement. Even big-ticket items that once required in-person transactions – like buying a home, furniture, or car – moved completely online due to necessity, but these online purchases are quickly becoming an established channel for digital retail sales. For automotive, the percentage of revenue from leasing or buying a vehicle through an end-to-end online experience is growing.

In fact, Deloitte found that there is a percentage of consumers that prefer a virtual buying process. Whether fully online or digitally-powered, the shift to digital retailing is creating new opportunities and challenges in a competitive industry – especially for vehicle finance and manufacturer’s captive finance organizations who are on their own journeys to become digital captives.

The forces of change in automotive financial services and among consumer expectations are relentless. Captive finance organizations must accelerate the pace of their digital transformation efforts to keep up or be left further behind.

Industries like automotive and captive finance that were built on decades of face-to-face interactions, dot-matrix-printed paper contracts, wet ink signatures, too many manual processes, and endless phone queues are now scrambling to digitize – but their challenges are familiar and many. Multiple, decades-old systems from the 1970s and complex business relationships between manufacturers, dealers, diversified global business units, and captive finance organizations make streamlining experiences and processes overwhelmingly difficult – especially given the current competition for top tech talent.

As my colleague Steven Silver, Pega’s Global Industry Market Leader for Manufacturing, explains”

It’s not that captives don’t recognize the urgency to modernize. It’s that these complexities are significantly slowing their pace of change and its business impact. Meanwhile, captives’ traditional roles risk being replaced by nimble fintechs or those lenders that are better able to harness new capabilities and rich data to develop new customer- and dealer-friendly products and services. Simplifying modernization is now imperative.

The disconnected jumble of systems, records, applications, and channels typically found in legacy enterprise systems is not only preventing original equipment manufacturers (OEMs), dealers, and captive finance organizations from providing the types of easy, digital services that consumers expect, they are also inhibiting innovation. Today’s connected vehicles generate multitudes of data that provide opportunities to develop personalized products and services – or in other words, the type of customer-centric experiences that build value and increase customer loyalty. Electric, autonomous, and connected vehicles that require new and different types of service and support open the door even wider for innovative business models and new revenue streams. McKinsey & Company reports that on a global scale, the ability to monetize vehicle data could create a whole market segment valued between $250 and $400 billion globally by 2030.

But to put innovation into action, captive finance organizations need an enterprise solution that builds agility into those legacy processes and systems that are struggling under the weight of yet another point solution, application, or massive system of record. Rather, captives need to be able to share data, standardize and iterate on new processes and experiences, and operate across regions and lines of business that require degrees of variation, while still relying on their legacy investments. Chartering yet another multi-year initiative to update these legacy systems piece by piece isn’t an approach that will keep up with the quickly evolving marketplace or the need to deliver value in months rather than years.

To innovate and capitalize on new revenue streams, captive finance organizations need a “fabric” to align and orchestrate their people, processes, and technology through enterprise-wide modernization.

A captive-wide modernization strategy is a bold approach, but not one their CIOs, COOs CFOs, business stakeholders, or dealers have much appetite for. During this “digitize or die” moment, we recommend captives pause momentarily to recalibrate their transformation efforts with a thorough assessment of three pillars critical to delivering value – people, process, and technology – and the connective tissue of desired business outcomes that links them together.

  • People: Ensure executive sponsorship, buy-in, and advocacy to successfully realize any major enterprise effort. Change is always challenging, so clear, consistent communication, coaching, and support will help develop the organizational alignment and governance necessary for transformative projects.

  • Process: Identify core products, services, and processes common across business units and regions that can be reused, adapted, and deployed quickly to demonstrate value. This is your baseline for modernization from which you’ll differentiate and scale. Collaboration between business and IT leaders is crucial in identifying and standardizing critical processes, data, and technology.

  • Technology: The journey to becoming a digital captive requires a unified operating model that can automate and orchestrate work across any process, journey, or experience in any business unit or geography and the myriad of silos inherent in automotive retailing and finance. Critically, this platform must also be agile, allow you to design for customer-centricity, support reuse through localization and specialization, and automate workflows. You’ll also need to establish a business architecture that puts intelligence in the center, so that your business rules, data, and AI are accessible and can operate and scale across channels.

Read our recent paper, Core principles to enable digital transformation, for more context on how each of these pillars is essential to successful digital transformations in the captive finance industry.

The pandemic forced buyer changes. But the digital evolution that we thought would unfold gradually over the decade is a revolution happening right now. There is no turning back.

As consumers demand effortless, personalized experiences, captives need to have capabilities in place to quickly adapt and modernize their legacy processes, products, and experiences, working in conjunction with their OEM and dealer partners to remove obstacles and complexity in the face of structural constraints. The risks of captives delaying, deferring, or diminishing the impact of these changes are competitive irrelevance, obsolescence, or worse.

It takes leadership, vision, execution, and discipline to harness new capabilities and transform an organization into a better version of itself. Now is the right moment to become a digital captive that is more efficient, more customer-centric, and more resilient in a time of constant disruption.

Need a guide on your digital journey? Please reach out, as we’d love to show you how.

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Industry: 製造

著者について

Michelle Garcia, PMP, is a director and industry principal for manufacturing, automotive and high-tech at Pega with more than 23 years of experience working with automotive enterprises to improve customer journeys, processes, governance, and technologies through digital transformation.

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