The equipment finance industry is turning toward developing technology like AI to bolster operations and reduce costs, and investment in relevant technology should see an increase in 2024.
Equipment dealers, lenders and OEMs benefited from strong equipment demand and tight equipment supply following the pandemic, but as business cycle normalization returns in 2024, AI and software will be key components of the new normal, Beckham Thomas, co-founder and chief executive of equipment finance software providerTrnsact, told Equipment Finance News.
“In the essential use industries — construction, transportation and agriculture — those dealers had incredible last few years, and that’s changing. It’s back to business as normal to some degree,” Thomas said. “There will be more of an emphasis on productivity, administrative overheads, and how and where they can make things more efficient.
The Equipment Leasing and Finance Foundation projects real investment in equipment and software to rise by 2.2%, according to the foundation’s Dec. 20, 2023, U.S. Economic Outlook report.
Engagement and case studies will be part of the AI refinement process, Scott Nelson, president and chief digital officer of Tamarack Technologies, told EFN.
“2024 will be a year of engagement for AI and we will start to see case studies of both success and new challenges,” he said. “Some will fall into the dreaded ‘trough of disillusionment’ and others — those who are prepared —will move quickly into operational improvement by making better decisions faster.”
The trough of disillusionment is the state in which interest in a product declines following initial hype and expectations, according to research firm Gartner.
“Dealers, lenders, OEMs had previously looked at [customer expectations and compliance requirements] as an afterthought and a customer should have to print, sign, scan, fax or email a credit application,” Thomas said. “Given how ubiquitous and user-friendly technology is in our consumer lives, the ecosystem is now more attuned to this and should be better, faster, easier.”
OpenAI and ChatGPT propelled AI into the limelight in 2023, resulting in increased awareness, Tamarack’s Nelson said.
“We couldn’t help but notice AI as it was in the news almost every day and we were repeatedly forewarned that AI would be the end of everything from actors and scriptwriters to humans as a species,” he said.
Nelson compared AI use to the internet boom of the 1990s.
“Think about how the first web browser, Mosaic, enabled mass market engagement with the internet in the early 1990s. Just like the internet at that time, AI as an operational technology has been around for decades and already in heavy use by many.”
There’s still room for AI usage to grow, Trnsact’s Thomas said.
“Data analytics has certainly been a powerful area, as well as credit screening or underwriting for AI today, but I think it’s still pretty new for most of this industry segment,” he said.
“Automation is not king; speed is not king. We want to meet the customer where they are, and that could be the internal user called the salesperson at the lender, salesperson at the dealer. It could be the buyer borrower,” he said. “They may want to pick up the phone, or they may want to be able to go online and complete their request via self-service module.”