Month: May 2011

Flexible Organizations for Finance Startups

I was asked recently to describe the role of Bank One as a service provider for the startup BMW Finance.  Having served as CIO for BMW Finance, my glib response was that we supplied the systems and they supplied the users.  This was an unusual arrangement, and key to Bank One winning the business.  Our systems had to meet their standards before the bank would commit to service levels.

Outsourced servicing can be an important first step for a new finance company, as it was for BMW, and I have seen it done various ways.  A more typical arrangement was our earlier one with GE Capital.  They did all the servicing using their own facilities, and BMW did the sales and marketing.

I once observed that you could start a finance company using only a checkbook and some business cards.  This was at the Consumer Banking Expo, where one could easily find an outsourced credit department, collections agency, call center, etc.  This opens up the possibility of departmental outsourcing.

Manufacturers have captive finance companies, and so do dealer groups.  During my tenure at AutoNation Financial Services, we had our own credit department, sales, e-commerce, and staff functions.  World Omni handled discounting, collections, and customer service.  The plan was to migrate the operation in-house, one function at a time.

Depending on their objectives, a finance company may choose various servicing options, from hybrid arrangements to full autonomy.  I would also recommend a permanent core team at the executive level, regardless of which functions are outsourced.

Value Proposition for e-Contracts

Matt Nowicki has a good article over at F&I Magazine, in which he offers reasons why dealers should embrace e-contracting.  His audience is general agents, and we imagine them trying to sell the idea to an F&I manager.  Another group Matt might have included is the menu-system trainer, trying to coax the manager through those extra steps.

Provider Exchange Network, which ODE purchased last year, will allow for e-rating and e-contracting between providers and dealers through the DMS.

As I have written previously, we innovators have an obligation to show value for the dealers.  They don’t care if multipart forms are impractical, for instance, as long as they are supplied free of charge.  Matt’s article answers some of the objections to e-contracting.  A little discount wouldn’t hurt.