As tech adoption proliferates in the industry, equipment lenders must form strong partnerships with fintechs to ensure seamless implementation and maximize returns on investment.
Eighty-three percent of about 300 banks and capital markets firms reported plans to increase spending on data management technology in the second quarter of 2024, according to research firm Statista. Seventy-five percent planned to invest more on cloud computing services and 63% planned to increase spending on AI and machine-learning solutions.
The global fintech market is projected to more than triple to nearly $1.2 trillion by 2032 from $340 billion in 2024, according to research firm Fortune Business Insights.
Equipment financiers are adopting AI and other tech-driven solutions for tasks such as credit approval, fraud prevention, loan origination, compliance and data analysis.
In the early stages of adopting new technologies, lenders should prioritize limiting disruption to the business, Timothy Appleget, director of technology services at St. Paul, Minn.-based Tamarack Technology, told Equipment Finance News. Minimizing data transfers is one way to limit disruption, he said.
“For instance, on data conversions, a lot of people think they need to go full historical — to get every piece of data and bring it over into the new system,” he said. “They don’t. … There are other ways to manage a business with providing data outside of a large data conversion into an application.”
Lenders should also set clear expectations of what they want to achieve with certain technologies and stick to those goals, Appleget said.
“That will allow you to deploy more advanced technology if you have cohesion and continuity into a more strategic vision of what you want,” he said.
Embracing the new system
Despite increased tech adoption in equipment finance, the industry is considered old school in many ways.
Equipment lenders can maximize new technologies and fintech partnerships by aligning their businesses with new systems, as opposed to trying to customize them, Erik Tyvoll, assistant vice president of information technology at Alpharetta, Ga.-based heavy equipment lender Zaxis Financial Services, told EFN. Zaxis recently partnered with Tamarack for data collection and analytics services.
“I think what happens in a lot of implementations that hangs businesses up is, we see the software and we’re immediately like, ‘Well, how do we customize this?’” he said. “Well, there’s a reason that you moved to a new software. It’s because there were problems with where you came from.”
Tyvoll said he encourages lenders to embrace the differences of a new system first and customize it over time. Running a new system parallel with an old system can also be an effective way to ease into a new tech stack and limit disruptions, he said.
Delivering long-term solutions
For some lenders, rapidly advancing technologies could cause concerns over continuous investment and the need to keep software up to date.
Fintechs can ease these concerns by improving software through “continuous, small steps” and providing a “modular cloud architecture” that allows lenders to add and remove functions as needed, Tamarack President and Chief Technology Officer Scott Nelson told EFN.
“The hardest thing about software improvements is making sure you don’t break something,” he said. “It’s testing. And that’s the responsibility of the vendor.”
Most equipment financiers should prepare to invest at least $100,000 over 12 months when implementing a new technology stack, although the cost varies greatly depending on the size of the institution and the number of applications needed, Nelson said.
Once lenders are up to speed with a new system, they have a “distinct advantage” because the “cost of change is so small” with the multi-tenant cloud models that are essential to most software-as-a-service offerings today, Philip Taliaferro, chief growth officer at Lehi, Utah-based online lending marketplace Lendio, told EFN.
A multi-tenant cloud allows multiple customers to share computing resources, with each user’s data being stored separately and securely.
Anticipating, not reacting
Partnering with forward-looking fintechs helps equipment lenders stay ahead of the curve and anticipate needs for certain technologies, Zaxis Financial’s Tyvoll said.
“You can’t anticipate everything, but having really strong partners is the key to it in my opinion. It just has to become part of your culture and development — we always want to be just moving forward.”
— Erik Tyvoll, AVP of information technology, Zaxis Financial
Closely monitoring “value shifts” in the market is also key to anticipating the potential roles of tech in equipment finance, Tamarack’s Nelson said.
For instance, “AI is going to make underwriting free, is my vision,” he said. “So, then I think about, if underwriting is a key part of an equipment finance company … if all that becomes free, where is your value?”
The third annual Equipment Finance Connect at the JW Marriott Nashville on May 14-15, 2025, is the only event for both equipment dealers and finance providers. Learn more and register here.
