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Guest opinion: online finance holds answer to compliance conundrum

Simon Cadbury, director of strategy and innovation at financial technology company Intelligent Environments

As the sales practices around motor financing are increasingly brought into the spotlight, it has become clear that something must change.

And with everyone from the media to the FCA questioning the transparency and complexity of the process, financial services organisations must act soon, or they could end up facing harsh penalties.

Most worryingly, the questions being raised around motor financing are the same as those raised around fee-paying accounts.

In this case, the FCA were once again quick to act, forcing banks, including Lloyds TSB, to suspended branch and phone-based sales of the accounts, opting to only make them available online.

Moving the process online could be the right answer, allowing consumers to apply for financing packages in their home or through a tablet in the dealer while still ensuring that all sales are fully compliant and automatically audited.

This could work as a ‘hybrid’ model, where customers complete an application for finance online before visiting a dealer to find a car, or a direct to consumer model, where the customer buys both the car and finance online.

Indeed, several high-profile manufacturers, including Peugeot, Hyundai, and Mercedes are already piloting an ‘order and finance’ for pre-built vehicles.

What’s more, with a study by review site Trustpilot and the Centre for Economics and Business Research finding that £1.5bn worth of new car sales will have shifted online by 2020, the advantages of moving online are obvious.

Within a decade it’s predicted that 20% of all new cars in the UK will be purchased on the internet, so it’s no surprise that the same study concluded that car dealers could lose up to £41 billion if they fail to adapt to this modern sales environment.

Ultimately, with both the threat of regulation and the need to respond to customer demands driving financial services businesses online, a step-change is required. Investment in online processes is hugely important, and something that will, hopefully, become more commonplace over the next few years.

Author: Simon Cadbury, director of strategy and innovation at financial technology company, Intelligent Environments



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  • Alex Thomson - 13/07/2017 20:53

    With respect Simon, moving the issue on-line only transfers the compliant sale of finance straight back to the consumer - who will be deciding for himself if the finance product is affordable and sustainabie. The inference taken from your article is that the thousands of car sales executives and dealerships are not capable of arranging car finance compliantly. This is just NOT the case. In my proefessional experience of auditing finance sales in dealerships, the vast majority of firms adopt compliant cultures and sales in their objectives. I suggest the content of your article does a huge disservice to the professionalism of the Motor Sales industry. Alex Thomson