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Generating Leads from Thin Air: How IoT can Transform Commercial Asset Financing

With the financing industry evolving at breakneck speed, firms need new ways to generate leads and verify their validity. However, studies suggest that on-ground visibility into prospective customers is less than adequate. Despite rapid innovations in data collection and analysis technologies, financiers continue to rely on legacy methods to collect data.

A recent report found that only 10% of asset finance companies are sure that there are zero gaps in their data collection process across the customer journey. This leads to several challenges:

  • Without real-time information, financiers can miss out opportunities to lend to interested customers and increase their reach.
  • Equipment that is already under financing will soon need renewal and a fresh set of funds–however, financiers have no visibility into these events.
  • After a lead has been converted, it takes a protracted period of time to gather all the relevant data, verify every source, and start disbursing funds at a best-fit rate.

All of these factors have perpetuated the existing inefficiencies in commercial asset financing—even as we move further into the digital era.

Here’s where the Internet of Things (IoT) could play a major role. It could give financiers a glimpse of relevant asset and equipment performance parameters in near real-time, helping to promptly detect financing opportunities.

Emerging Opportunities in Asset Financing—How IoT Unearths Hidden Leads

A traditional financing process flow looks something like this: The customer identifies the need for funds and starts researching to find the best possible rates. After multiple sessions of “rate shopping” and seeking recommendations from their peer network, the customer approaches a financing firm with their requirement.

The financier evaluates the lead in detail, considering various parameters of the requirement, future opportunities, the level of risk involved, and the customer’s corporate/commercial background. Post this exhaustive process, funds are disbursed at an end-to-end or incremental model. There’s always the possibility that such a protracted customer journey will lead to a drop-off midway.

And if the funds aren’t allocated within the requisite timelines (a critical factor in commercial scenarios), the customer isn’t likely to return next time around.

An IoT solution combined with 5G networks aims to turn this model on its head. It brings the convenience and speed of retail financing to the more complex commercial asset sector. Sensors are embedded across the commercial ecosystem to quickly verify the data provided by the prospect. By regularly monitoring this sensor data, financiers can even anticipate a loan opportunity—reaching out to the customer even before they “felt” the requirement. This is enabled by two promising trends.

  1. The global IoT market is growing at an exponential pace, expected to double between 2017 and 2021. The viability of IoT depends on its scale: a standalone IoT implementation will only provide non-contextualized customer information. But with the widespread use of IoT, financiers can accurately benchmark every equipment, customer, and company against competing prospects.
  2. IoT is rendered practically useless in the absence of wide coverage, low-power networks. Fortunately, real-world 5G implementation is now a reality, with governments investing in 5G infrastructure and manufacturers eager to develop 5G compatible devices. Early adopters are already out there with Verizon having launched the world’s first 5G network in April of 2019.

Together, IoT and 5G are poised to transform how financiers in the commercial equipment space operate. Since 2013, commercial real estate has witnessed the fastest growth in the IoT-based financial services segment. The use of IoT in commercial real estate financing jumped by a massive 98% CAGR in this period; this bodes extremely well for players in this area. Financiers can now shrink traditional timelines of weeks or even months, to mere hours, powered by IoT-based “lending factories.”

This will drive a whole new process flow which looks something like this:

  • The customer simply holds up their smartphone and snaps a picture of the desired equipment.
  • Using advanced image recognition, the financing platform identifies equipment type, sale price, collateral value, estimated interest, and loan terms and conditions, right on the app. This is similar to Google Lens, which can analyze an object and offer recommendations to B2C customers.
  • Next, the platform features an “apply now” button for customers to decide if they wish to go ahead basis the given financial parameters. At the backend of the platform, is an automated lending factory that drives approvals in hours or even minutes by combining image recognition data, information from connected sensors, and third-party databases (for example, social media). In other words, the verification process is dramatically cut down.

Finally, at regular intervals, the IoT sensors will continue to relay information back to the financing firm. This can be visualized on a business dashboard with predefined alerts for exceptional events. For instance, if a piece of equipment has undergone maintenance at an over-high frequency, it may signal a “hidden lead” for the financing company.

Next-Gen Technology Will Be the Backbone of Tomorrow’s Financiers

We are still a long way from making the IoT+5G enabled commercial lending environment a lived reality. For example, Verizon’s 5G launch is only limited to parts of Chicago and a few other locations. The availability of 5G-ready devices is also a concern. However, the industry is growing at a rapid clip, and the future of commercial asset financing will be shaped by the following technologies:

  • IoT sensors embedded in equipment and locations to analyze wear and tear
  • A 5G network that allows rapid data transmission without consuming too much energy
  • Efficient storage (both on the cloud and on edge) with minimal hardware dependency
  • Advanced analytics and visualization technology to convert raw data into actionable insights
  • Process automation to share timely alerts with key stakeholders on the financing value chain
  • Image recognition technology to align physical objects with digital information
  • A mobile app to bring all of these elements together in a user-friendly interface

Our team is looking to deliver a solution that streamlines decision-making in commercial asset financing. Instead of having to rely on dated records, financiers can now gain real-time visibility into equipment using IoT, along with an analysis of all related conditional parameters. And this is just the first step—going forward, our solution will help add significant value by proactively “lead hunting” based on the most relevant, accurate, and, immediate data inputs.

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