Syifa Syauqiyah

Universitas Brawijaya
Case 1: What do you think about the automotive credit industry in five to ten years?
For decades, automotive credit industry could rely on the coop business model and were
able to grow steadily. Traditionally, the original equipment business manufacturers (OEMs) and
automotive credit industry was measured by car sales and related sales financing or leasing
contracts through dealers, create a locking effect for customers and generate in a sustainable and
predictable income stream. In recent years, observed that the mobility industry majorly changes,
which will further gain momentum in the next five to ten years and is likely to have a direct impact
on OEM business model, automotive credit industry and mobility providers alike. In this case,
analyzed that these changes in industry as well as in customer behavior in the Asian market. Both
automotive banks and mobility providers will need new competencies to be able to serve the
demand for mobility and maintain their competitiveness in the future.
The first thing that we have to take a look is the changing automotive industry and customer
behavior. In 2020, accelerated by the global outbreak of COVID-19, car sales in the region shrunk
by a whopping 33.9% year to date (According to data collected by the ASEAN Automotive
Federation from January to October 2020). Consumers are highly focused on their health and
personal well-being and have changed many long-standing habits and preferences to avoid
infections, including requesting touchless sales processes. In the mobility sector, this causes many
passengers prefer the mode of transportation which is considered safer and more hygienic. In
contrast to ride-sharing, individual mobility is suddenly enjoyed rising demand again. Work from
home is on the rise, motivated by need to maintain safety, during business trips and all related
mobility services – flying, taxis, e-hailing – low demand. COVID-19 pandemic also evidently
accelerating digitization, reinforcing customers dissatisfaction with current automotive sales
offerings. Every company manages to keep the time between selection and purchase of a product
as short as possible.
Currently, once a consumer start to see their mobility needs, they tend to much more
informed about the product. According to the study, 43% of 1.000 consumers indicated that they
do most of their research online before buying. However, in automotive industrial consumers do
not experience the same convenience they feel from online shopping made possible by leading
technology companies. One of the examples is, someone has to click on an OEM’s website and
rarely gets the option to buy directly by online. The indirect business model of many automotive
credit industry, which involves processing through car dealers, is often a bottleneck to a purely
digital customer experience in this regard. Due to the conditioning by several aforementioned tech
giants, customers are used to 24/7 availability for online purchase and perceive these bottleneck
as inconvenient and contrary to good service. Based on McKinsey study research, it showed that
59% of customers use online portals to compare vehicle prices, but particularly after the costly
purchase of a new vehicle, customers perceive the months-long delay in receiving product
shipments to be out of sync with times.

Those new customer requirements and demands lead to a rapidly growing competitor
landscape in the automotive and mobility market. In 2018, 75% of all newly registered vehicles in
Asia were financed by a leasing contract (Deloitte Future of Captives Study 2030). Despite
shrinking margins and increasing regulatory requirements, the automotive credit industry remains
a highly lucrative target segment for new competitors. The competitor landscape is undergoing a
paradigm shift: from the automotive bank’s point of view, mobility start-ups and other tech
companies are entering the market alongside the traditional OEMs and posing a direct threat to the
automaker’s established business model. These new players hope to take advantage of customers’
new requirements and expectations regarding the process of car financing and mobility, such as:
distribution across multiple sales and service channels, digital customer journeys, price
transparency and flexibility. We can take a look how soon the new supply of financing and
mobility services are met by a continuous improvement in customer demands. Automotive banks
retain a small advantage over their peer group because two aces up their sleeves, there are: their
still high customer loyalty and the concept of a car that is still relevant ownership, both of which
are expected to change in the future.

As described in the previous, we observed shifts in customer expectations, in the

automotive industry, and in the competitive landscape. Leading to a major change in the customer
lifecycle and the way mobility is consumed. Under these new state, it will no longer enough to
only have traditional core competencies. Instead, new competence is increasingly important and
will be needed by both automotive credit industry and other mobility players in order to serve
mobility demands of new customers, maintain their existing customers and maintain their
competitiveness in the future. Five core competencies that must be maintained by automative
credit industry for the next 5-10 years are: Customer lifecycle management optimization, customer
centricity, flexible contract management and agile operations, API based architecture for products
and services, and also data-driven and intelligent business operations to increase operational
excellence.

The first one is customer lifecycle management optimization. Automotive credit industry
have to optimize their customer lifecycle management capabilities, enabling a new, digital “lock-
in” effect by offering attractive and convenient end-to-end services to their customers along their
entire journey. Second, customer centricity are consist of develop a seamless omnichannel
customer experience to differentiate from disruptors, neo- and retail banks, who are already
competing for market share. Third, flexible contract management and agile operations. This
development poses a major challenge for many automotive credit industry and their IT systems,
as these often have limitations in terms of flexibility and adaptability. Therefore, a flexible contract
management system is installed with agile operations will be a core competency and competitive
advantage for the automotive credit industry of the future. Combined, they allow for products
innovation, better operations and faster speed to market, and thus act as new flexible mobility
service enabler desired by customers. Fourth, API based architecture for products and services.
Application programming interfaces (APIs) can be consideredas an entry ticket to a digital
ecosystem, enabling the transition to cloud services.This allows companies to reduce time to
market for new products innovative services and products. API-based architecture is the basis for
the integration of products and services on the platform and will enable automotive credit industry
to increase customer reach and market share and leverage their network of partnerships. Last but
not least, data-driven and intelligent business operations. To be truly data-driven, companies must
create cloud data strategies and link their data-driven strategies to clear business outcomes. We
can believe that the automotive credit industry recognizes this opportunity and being committed
to being a data-driven company will have a significant impact competitive advantage in terms of
acquiring new and retaining existing ones customers, and achieve above-average profitability in
the future.