More equipment finance lenders are using digital contracting tools as customers demand faster funding, and growing fraud concerns are forcing finance companies to add verification processes.
Electronic signatures, digital documents and automated funding have become increasingly common across equipment finance, helping lenders improve customer experience and reduce processing times, Eduardo Cruz, president of Commercial Equipment Financing, said during a panel discussion recently at Equipment Finance Connect.
“How that’s benefitted is the process. Everything’s Docusign now.” — Eduardo Cruz, president of Commercial Equipment Financing
The use of e-contracting increased 0.7% year over year in the first quarter and has risen 46.6% since the first quarter of 2022, according to global information and software firm Wolters Kluwer‘s Equipment Lease Finance Digital Transformation Index.
But there’s still room for improvement, Cruz said.
“Some lenders already have these capabilities, but I’d like to see more payoff automation and AI agents that can quickly provide payoff quotes and basic deal information,” he said.
“The data is already sitting in Salesforce or another CRM and if it’s labeled correctly and the system is trained properly, customers should be able to get that information immediately.”
Speed drives adoption
For many lenders, digital contracting is less a competitive advantage and more a customer expectation, Matthew Babcock, digital lending product strategist at Wolters Kluwer, told Equipment Finance News.
Smaller-ticket lenders and independents often compete “more on speed and the customer experience than some of these captives or the banks,” he said. “That’s sort of the exact value prop that e-contracting is going to be able to help with.”
In fact, four of the five fastest-growing digital lenders on Wolters Kluwer’s platform in Q1 were independents, Babcock said.
Fraud concerns add friction
While digital contracting can accelerate funding, fraud prevention remains a challenge, with lenders relying on electronic signatures, remote documentation and digital verification tools, D.J. Jackson, senior director of business development at Oakmont Capital Services, said during another panel at Equipment Finance Connect.
Notarization requirements and identity-verification processes can create friction for customers, but help reduce risk, Jackson said.
“We look like a big pain in the neck when we’re coming back [at] that client. … But this is really to protect you.”
Some customers remain skeptical of digital communications and electronic paperwork, creating additional challenges for lenders trying to streamline transactions, Heidi Brooks, U.S. sales manager for commercial finance at commercial and vendor finance firm DLL, said during the panel.
That’s why communication remains key, Brooks said.
“Having trust between ourselves, our dealer network and our OEM partners allows us to have those conversations and say, ‘We know this is annoying, but we have to do it because we want to protect you and ensure your business is successful.’”
Despite a slight quarter-over-quarter decline in Wolters Kluwer’s index, the trend remains positive as lenders continue investing in digital workflows, Babcock said.
“We’re reaching a bit more of a point of maturity in terms of digital on equipment,” he said. “I think the story for digital is it is a growth tool, but it also doubles as this defense mechanism.”
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