Living in the Future: The Monitor 2019 Tech Roundtable
by Monitor Staff August 2019
Trying to get a read on current technology can be difficult enough, but trying to predict where it’s going, especially for a non-expert, can seem impossible. Monitor interviewed six executives from different software companies to provide a guide to both current and future digital trends.
AI and robotics process automation are hot topics. How close is the equipment finance industry to adopting these trends and how will it affect large and small lessors?
Katie Emmel: AI and robotic processes have the potential to deliver great value to the equipment and asset finance industry. While we could look to efficiency gains, I prefer to look at this from the end customer’s viewpoint. AI and robotics can drive a highly responsive customer experience, especially where current processes are impacted by manual processes making the interaction slow and cumbersome. In the origination of a new lease or loan, there are required steps to complete the application process, including information gathering, credit check and agreement signature. Today, much of the process is completed on non-connected systems which require manual processing. With the greater flexibility of cloud and web services-based architectures, these disparate systems can be aligned, allowing an AI system to quickly and efficiently move customers through the approval process, based upon the organization’s risk parameters.
Mitchell Kaufman: AI and robotics have the potential to affect lessors both small and large. In fact, larger financial institutions are already testing AI to rate pools of loans that they then syndicate. AI can be used in the underwriting process to evaluate prospective customers. Scoring platforms, including Lenddo and ZestFinance, specialize in using thousands of data points to help score applicants with thin credit files that traditional scoring systems would reject. These systems can be incorporated into the adjudication process for any lessor.
Robotics process automation (RPA) and cognitive capabilities like natural language processing will allow for technologies that can manage tasks that humans perform, including customer service. These are “down the road” for most companies but have the potential to transform business processes for all lessors.
Vladimir Kovacevic: It may sometimes feel like we, as business owners, are not doing enough to leverage these trends, but the reality is, it’s difficult to stay away from these technologies even if we tried to. These new services and solutions are finding surprising ways to become part of what we do, sometimes without us even noticing. For example, if you are using LinkedIn [and] posted a position, then you are relying on AI to match your ad to potential candidates.
The effect of leveraging these technologies can be profound. Speed, ease and convenience all go up and services previously available only to the largest institutions become essentially free. Getting this level of sophisticated predictive analytics would have required a multi-million-dollar investment only a few years ago. It’s by leveraging these essentially free features that lenders can get a huge ROI relative to the investment in the underling platform.
The good news for the equipment finance industry is, there is no barrier to entry. The playing field has been leveled and it doesn’t matter if you are a small or a large company. The cost and time to implement have all gone down dramatically in the recent years. It comes down to having the right technology strategy and understanding that today every company is a technology company.
Jay Mehra: Today, much of our work is focused around automation and efficiency. How can our platform enable lessors (and their customers) to reduce the manual intervention needed to facilitate core business processes? And to this end, we are doing work with RPA to automate repetitive, manual, very structured and very logical tasks. In effect, you want to focus on members of your work force that are in the digital world. With RPA, routine activities can easily be performed by software without manual intervention. And from a technical perspective, if you think about it, RPA engines are essentially looking to invoke low-level APIs within a system to orchestrate system functionality — so this is not a technology that is so far out of reach.
And then there is an even more complex domain that sits within this space — cognitive automation. Cognitive automation is when you add AI to bring intelligence to information-intensive processes. So, in this scenario, there will likely be an ‘if-than-else statement’ that is executed by the bot where it can run complex analysis, ultimately making that determination and processing that action or making that decision for you. And bots are something that are very accessible even today. It requires a partnership between business and IT to ‘train’ these digital workers, and it requires tighter alignment between business functions on what your processes are.
Sean Scampton: Honestly, I’d say both very close and very far. Equipment finance, like the rest of the broader finance industry, is traditionally slow to identify technology trends and even slower to adopt them. We’re all so caught in the rat race that taking the step back needed to explore how best to implement new concepts doesn’t feel practical. That said, AI and robotics process automation tools are more accessible and cost effective than ever. We are working with a handful of startups that want to enter the marketplace with these tools in place or at least with a roadmap to adopt. There is a unique opportunity for the creative, forward-thinking team to match or even surpass the offerings of their more dominant competitors. As the playing field becomes more level, I think we can expect a boom in investment in AI and automation industry-wide, and I think it’ll happen rather suddenly.
A recent survey commissioned by The Alta Group showed most equipment finance companies view blockchain as a relevant technological development for the industry, but few have started to integrate it into their platforms. How can these companies begin to explore this technology?
Kovacevic: For any new technology to be properly used in an industry, it’s important that there is a clear understanding of what problem that new technology solving. In the case of blockchain, the problem being solved is the problem of trust. In lending, trust is a key concern and being able to trust the information provided by the applicant, broker or dealer makes a difference between a slow and cumbersome process where everything needs to be verified or a smooth and seamless experience where decisions are made almost instantaneously.
Unfortunately, for blockchain to be properly used to resolve issues of trust in our industry, it requires adoption on a much larger scale. This is a key reason why we are not seeing more companies trying to leverage blockchain in their day-to-day operations. It’s difficult to predict how long before we start to see wide and practical adoption of technology powered by blockchain but as with any new technology once it happens it will be mission critical to be prepared and ready to act. So being informed and staying up to speed with the relevant technology developments is the key.
Fabien Oliveira: We have made our own study for the asset finance market, and we reached the same conclusions as The Alta Group. The potential for disruption and innovation is here, no doubt, but the budgets for implementing blockchain are not. This gap is in large part due to the fact that the most interesting projects are about sharing data in a secure and confidential way with clients, partners and competitors. The impacts in matter of governance are very important. You need to have a lot of different organizations, with different interests, agreeing on formats and protocols. Everybody will gain through collaboration, but nobody wants to be in charge. We believe that unless a third-party organization proposes itself as the project lead (such as a public regulation authority, a consulting group, or a software house), the asset finance market will struggle in launching proper blockchain-based consortiums. At Sopra Banking Software, we are investigating the possibility to play that facilitator role for several use cases.
In addition, the regulation around blockchain is not clear. The technology is maturing (quickly), and it is very difficult to find qualified resources. CTOs should take caution in investing too much in projects that could be outdated the next day.
Still, blockchain can already bring value to lessors and for a very limited budget. We recommend all organizations look at the value of blockchain in areas such as digital signature and document proofs of authenticity.
Scampton: First off, I agree with the viewpoint that blockchain is relevant. I’ve found that though awareness is growing, many business owners and executives are having a hard time wrapping their heads around its applications. The key, to me, is approaching the concept of distributed ledgers from the angle of real-world practicality. Security and transparency are wonderful ideals that certainly matter, but in my experience, those areas of interest don’t have the “wow” factor needed to push engagement. I think the most direct path to exploration will be through engaging others in the equipment finance industry and sharing knowledge. Discussion groups are slowly but surely popping up with associations like NEFA and ELFA and attending these sessions is a great way to get started. Leaning into applications like smart contracts and securitizations as opposed to loftier, security-minded pursuits will certainly help drive interest.
What can companies do to keep their employees up to date on new tech skills? How are tech companies doing the same?
Emmel: We have a three-pronged approach. One, we provide a learning management system which has a library of technical training courses that allow our team to brush up on technical skills or learn new ones. Key to this is making sure that you allow time for the team member to utilize the resources and take the training. Second, we encourage and pay for additional education for our team members. This is made available but requires the team member to drive the action. Again, you have to give them the time to get the benefit of the skill upgrade. Finally, we hire new talent with up-to-date skills and put them into agile teams to ensure the sharing of knowledge. This has the greatest impact, as the sharing of information has a direct impact on the projects they are working on and the hands-on training that comes from this type of information sharing.
Kaufman: My advice for lessors is to give employees time to research and learn about new technologies. Allow them training hours each year to explore interests. Bring in speakers to talk about trends in technology that impact the business. This is important not only to ensure that tech skills are up to date, but also to recruit and retain top talent. Employees are attracted to workplaces with clear professional development opportunities.
And this advice applies even more to technology providers serving the leasing industry. Our company views tech training as critical to business development and employee retention. We want to attract and keep the kinds of employees who are driven to expand their skill sets.
Scampton: Hiring the right people is key to keeping a finger on the pulse of new technologies. Luckily, we live in a world where professionals expect to have multiple careers in their lifetime, and it’s more sensible than ever to hire someone with a technology background that can fit into a non-technology-based role. Members of our team are proficient in disciplines that seem unrelated to their primary job, but give us tremendous organizational flexibility. If a funder wants to figure out how to implement blockchain, for example, look for a young professional who is engaging enough to serve as an underwriter and lean on that expertise to provide added organizational value. Creativity in building your team is going to be more and more key moving forward.
What tech trends do you see coming down the pipeline? How do you stay on top of such trends and what products do you develop to keep up with them?
Emmel: There are many technologies that will impact the asset and equipment finance industry, but what will be most important going forward is how these technologies work together to deliver a more personalized and efficient customer experience. Cloud-based technology will continue to have an impact on the way technology is consumed and application program interfaces (APIs), web services and other connecting technologies will allow these technologies to work together to deliver a seamless experience. Additionally, we see the use cases for AI, robotics and blockchain growing, driving adoption across the industry.
We spend time with our customer’s technical teams listening to the problems they are trying to solve. We also conduct direct market research and participate in industry committees such as the ELFA Operations and Technology Committee. This research provides a map for identifying new technologies that can address these opportunities and helps guide the connection of an ecosystem of products into a wholistic solution to enable our customers.
Kovacevic: Most of the new functionality, new integrations and new services we are working on are in some way related to the broad field of AI. More specifically, advancements we are seeing are related to machine learning, natural language processing, vision and speech.
As a technology company, we see it as a matter of competitive advantage to be closely involved in these developments and find out how specific advancements can be applied to our products and services in a way that the industry we work in would benefit from.
Specific product improvements that we are working on are related to ways AI can handle large volumes of data and eliminate mistakes that are based on repetitive work. Mostly these are centered on AI-driven document management with full text recognition and document classification. Also, we are making some interesting progress in areas of language processing where AI is able to escalate specific applications for management review because of the context of the conversation. The goal here is to resolve possible conflicts early and eliminate misunderstandings between internal and external stakeholders.
Mehra: Perhaps the most transformative force coming is the confluence of so many technologies available today through platform-as-a-service (PaaS). While many software companies call their technology solutions a ‘platform,’ it is a misnomer. In today’s world of PaaS, platforms not only provide functional coverage for business processes but also provide the ability to build, test and ship features in concert with integrated cloud services: analytics, computing, database, AI and more. It enables you to build your technology footprint beyond what is traditionally the domain of “back-end” and “front-end” leasing systems.
When you hear vendors talking about cloud offerings, make sure to really ask the questions about what ‘platform’ means. Ensure that the platform you choose to power your business can be configured to optimally serve your needs to scale dynamically and infuse more intelligence into your business.
Oliveira: Business digitalization will remain for the next few years the number one area of R&D. RPA will contribute a lot (emails, chatbot, voicebot), and mobility. On our side, we have been investing a lot in this direction over the last five years.
Cloud and DevOps may seem a geeky topic, but in terms of tech trends, they will become even more massive in the next years. The market is ready to have financial institutions go to the cloud with their core IT systems. Sopra Banking Software was already very active in providing managed services, and in 2018 with the acquisition of the Apak company, we became the leading global vendor in the asset finance world in number of clients running our solutions. •
Kenneth P. Weinberg, Shareholder, Baker, Donelson, Bearman, Caldwell & Berkowitz
Usury laws vary from state to state, which can make a lease or loan more complicated when the lessor is in one state and the lessee in another. Kenneth Weinberg discusses how this has played out so far in the courts, with favorable rulings for a lessor often depending not only on who files first, but where they file from.