Equipment financiers are turning to technology to manage labor markets and overcome macroeconomic concerns.
“We need to identify emerging industries, new technologies and demographic shifts,” Sarah Palmer, senior vice president of underwriting and asset management at Key Equipment Finance, said last week during a panel at ELFA’s Credit and Collections Conference.
“The job market is coming back into balance after the pandemic disruptions of previous years, and it appears resilient despite the noise around layoffs, tech and the crisis in regional banking, along with concern about interest rates and economic health, it’s still stubbornly strong.”
While the job market remains strong, automation and artificial intelligence (AI) are technologies with the capacity to transform the workplace and improve productivity, Palmer said.
“We may see the introduction or expanded use of automation and particularly artificial intelligence, which has the potential to completely transform our workplaces by streaming workflows, improving efficiency, reducing costs and improving speed,” she said. “However, this also can raise serious concerns about job displacement and the need for rescaling certain areas, [which] could include the credit and collections functions of equipment finance.”
Robotics, predictive analytics, AI-powered cybersecurity, chatbots, virtual assistants, autonomous vehicles and medical diagnosis are some ways automation and AI can be used in equipment finance, panelists said.
These applications are making an impact on industry engineering and sales, but they are expanding into areas such as collections, Chris Jung, director of Americas credit and risk officer of Cisco Systems Capital, said during the panel.
“There have been some pretty significant impacts to tech over the last six to 12 months,” he said. “We were not immune to that; it did not touch our finance organizations [as much], that was mostly targeted to certain engineering, sales type groups, but we’re also not adding anybody in collections.”
Total [nonfarm] payroll employment rose by 253,000 in April, and the unemployment rate remained at about 3.4%, according to the Bureau of Labor Statistics. In January, unemployment hit a 53-year low of 3.4%, Palmer said.
Productivity, analytics in labor markets
Productivity — defined as output divided by hours worked — in the United States dropped 2.7% in Q1, with production jumping at the onset of the pandemic, but slumping since, Palmer said. “The U.S. has now had five consecutive quarters of year-over-year declines in productivity, using data from the Federal Bureau of Labor Statistics, that has never happened before and data going back to 1948.”
The decline in productivity opens the door for organizations to improve operations, such as analytics, Jung said.
“We rely very heavily on analytics. Our analytics team is on top of measuring our portfolio. … We can see what the workload is looking like, and then measure utilization per credit manager,” he said. “We utilize that and then our credit application, where we can see all the requests, and monitor that for your people because our credit managers are basically assigned portfolios or regions.”