Digital transactions are on the rise in the equipment finance industry as it moves into the future.
Equipment finance e-contracting rose 34% quarter over quarter, 41% year over year, and 30% over the past four years, Tim Yalich, head of motor vehicle strategy at vehicle finance software provider Wolters Kluwer, told Equipment Finance News. The QoQ jump represents the largest quarterly increase in the index since it began tracking in 2019. A new financial institution entered the index during Q2, which upped the transaction numbers, he said.
“It’s twofold: There was a big client that came in and also the seasonal uptick [with] a lot of the smaller machinery, equipment,” Yalich said. Seasonal impact in the farm and landscaping segments also contributed to Q2 growth, he said.
“This time around it seemed like the small companies, your small commercial, your small landscaping, your mowers and small backhoes … a lot of sales in that space, which was really interesting,” he said. “There’s a lot of things in our equipment lease index that are motorized, so it’s farming equipment and stuff like that, so that is seasonal impact.”
Exponential ‘hockey stick’ growth ahead?
Wolters Kluwer’s Equipment Lease Finance Digital Transformation Index contains data on back-office document digitization from more than 160 of the company’s equipment finance customers. While the index shows a 30%, four-year-trend growth rate, recent quarterly performance indicates potential for exponential, or “hockey stick” growth, Yalich said.
“The next quarter will be the interesting one to see what happens, no question, and I like the fact that we’re seeing continual growth,” he said. “It’s really turning fast with the last two quarters.”
With the likelihood of a Federal Reserve rate cut coming near the end of the third quarter and the elections this year, the ability to develop a definitive outlook on the industry remains limited, but current e-contracting trends suggest positivity, Yalich said.
“The rate of adoption and growth of digital execution of loans is outpacing the actual overall market,” he said.
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