Shift to Digital Imperative as Competition Grows More Intense

by Mike Sweeney

August 2017

Mike Sweeney is responsible for originations for EverBank’s Vendor Equipment Finance business which includes healthcare, office technology, industrial equipment and capital markets. From the company’s inception in 2004 as US Express Leasing, he was general manager of the healthcare business until 2013 when he assumed responsibility as SVP, originations. Sweeney brings more than 30 years of experience in the equipment finance industry to EverBank.

With 2017 more than half over, Mike Sweeney of EverBank gives an update on how the year has gone in the vendor equipment finance industry. He examines the increasing competitive pressure in the market and the inevitable digitization of the entire sales process.

By and large, 2017 has been a positive year so far for the vendor equipment finance industry. We’re seeing solid year over year performance, as well as an optimism among industry leaders that hasn’t been felt for a number of years. According to Equipment Leasing and Finance Association’s 2017 Beige Book survey, 90% of captive and vendor organizations were flat or ahead in Q1/17, compared to new business volume in the same period last year.

However, despite the fact that many industry players are beating their 2016 benchmarks, the industry data also indicates that there is increasingly fierce competition in this space. None of the captive or vendor finance respondents in ELFA’s Beige Book survey saw spreads widen, which is indicative of the high level of competitive pressure in the industry. This reminds us that we must never become complacent, and we must continuously adapt to industry trends to further our competitive advantage.

One of the most important trends that industry players must consider going forward is the seismic shift currently taking place in U.S. consumption patterns. The trend toward digital consumption is impacting sales in every industry, and vendor equipment finance is no exception. According to a Pew Research study, 80% of Americans now shop online, compared to 22% in 2000, which demonstrates just how pervasive the shift has become. And the trend isn’t just driven by millennials, it’s also the baby boomer with 10 Amazon boxes on their front door step. As the next wave of technological innovation unfolds, is our industry ready to adapt? If our role in the equipment sale chain is to close the sale and provide sales aid financing, how do we make certain that we remain relevant in the sales process?

If we are to adapt, that first means utilizing technology in all aspects of our sales force. Vendor lessors must be prepared to transact business by providing a companion leasing quotation on a tablet or smartphone at the customer point of sale. This is now considered a condition of engagement rather than a unique feature. Expectations continue through executing the lease with an electronic signature on a mobile device to Electronic Funds Transfer. Not only will this provide added convenience to our vendors, but greater efficiency as well. According to ELFA’s 2017 Survey of Equipment Finance Activity in 2016, efficiencies gathered from automation and greater application of data analytics contributed to an overall year-over-year dollar increase in net income of 7.8% in 2016.

Furthermore, we must think about employing technology that allows for instantaneous access to information. For example, vendors need access to information instantly and many need to conduct themselves as a captive to the markets they serve with private label documentation and servicing thereafter. At EverBank, we have created a dealer portal that empowers our vendors to conduct business through the creation of a “virtual captive.” Vendors can view application activity in real time during the entire sales process and track the progress of funding by the minute. Cost per copy data and copies of actual invoices are a mere click away. Our dealer portal can be accessed by tablet or smartphone, so a vendor can communicate the status of a credit application in seconds. This instant access to information is critical for lessors looking to provide the best level of service to their vendors.

There’s no doubt that we are in the midst of an evolution towards digital consumption, and there are no signs of this shift slowing down. In order to remain relevant in the sales process, it’s imperative that lessors integrate technology into all aspects of their platforms. While earlier in this piece we asked “Is our industry ready to adapt?”, perhaps the better question is – what will happen if we don’t?

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