Digital transformation looks different for every industry and individual organization. For banks and financial institutions, that has meant digitizing the decades-old, manual processes that have long driven inefficiencies throughout the industry.
At the center of that is Sopra Banking Software, which has spent the past decade working with more than 1,500 financial institutions — such as Santander, Societé Generale, and Bank of Africa — to digitize how they operate and access new revenue streams.
“The entrance of fintechs and other challengers into the market has put pressure on traditional banks to transform how they do business. As these traditional organizations have moved to embrace digital infrastructures, it’s also opened them up to new opportunities to expand their offerings and roster of customers,” said Eric Bierry, CEO of Sopra Banking Software.
A subsidiary of the Sopra Steria Group, the global financial technology company, has been a centerpiece of banks’ digital transformation efforts.
Now, Sopra Banking Software is taking its banking technology approach to the U.S. auto finance market.
I sat down with Bierry and James Powell, Sopra Banking Software’s Head of Specialized Finance, to learn more about how the company will extend its expertise and technology to digitally transform auto companies and lenders.
Banking has been at the core of Sopra Banking Software since the company’s inception. How did SBS find itself in the auto finance industry?
Eric Bierry: There are many parallels between the digital transformation challenges that banks face and those that auto financiers face. This is true for both the retail side of auto finance, or the way that banks and lenders provide financing to consumers, as well as wholesale financing, which refers to the process of providing financing to car dealerships to purchase their floorplan inventory.
Like banking, auto financing is heavily dependent on legacy technology and manual processes, and companies are hesitant to digitize because it can be costly, time-consuming, and disruptive to business. But it’s these old-school processes that can also stand in the way of success and innovation in a digital-first world.
We’ve worked with over 1,500 banks and other financial institutions to crack the code on digitizing manual and inefficient processes–the natural next step was to bring this approach to auto manufacturers and lenders.
We currently work with auto manufacturers, including Mercedes-Benz, Toyota, BMW, Nissan, and Volvo, on their captive financing offerings, as well as banks and independent lenders who finance their dealership fleets, like Santander, TD Auto Finance, Lloyd’s Bank, and Standard Bank.
Our focus is now on expanding the digital capabilities that these companies rely on for all U.S. auto manufacturers and lenders so they can digitize their process of providing financing to dealerships.
Why is digital transformation so critical to the auto finance industry right now, particularly wholesale finance?
James Powell: Financing and managing fleets is a highly lucrative revenue stream for auto companies and lenders. But, if they continue to rely on decades-old, manual processes for everything from onboarding and renewing dealers, processing vehicle financing, floorplanning, auditing inventory, and entering new markets, it’s going to stand in the way of their success. We’re already seeing this with banks and financial institutions that have decided to part ways with their wholesale financing options completely.
The good news for both auto companies and financial institutions is that digitizing these processes eliminates critical inefficiencies on the financiers’ side, while providing a more enjoyable customer experience on the borrowers’ side. As a result, companies are not only able to remain in the wholesale financing space but become highly competitive.
Our work with auto manufacturers and lenders is greater than simply transforming how they provide financing to dealers and digitizing their business operations—we’re opening them up to new business and revenue opportunities.
With digital transformation being such a catalyst for business and revenue opportunities, why have banks and auto financiers been so hesitant to digitize?
James Powell: When a company changes how it operates internally and does business, it can be disruptive, risky, and resource-intensive. While digital transformation can be all these things, it doesn’t have to be with the right technology and partner.
The majority of banks and auto financiers don’t want to run the risk of disrupting their business when they’ve been relying on the same processes and technology for decades. The systems they’ve used for all these years also hold years of consumer financial data and processing capabilities that banks and lenders depend on, which has also been cause to put off digitizing them.
Given this initial hesitancy, what’s gotten these companies over the hurdle to start the digital transformation process?
Eric Bierry: For banks, the emergence of fintechs and other challengers have put pressure on them to transform how they work and support customers–even if they were still initially hesitant about it.
For auto finance, it’s not so much external pressures–but pressures from inside the industry. Cars themselves have evolved extremely quickly and are increasingly relying on software innovation, mainly because they’re selling directly to digital-first clientele. The backend processes that support the financing and selling of these cars haven’t evolved as quickly, but there’s now too much of a digital gap between the front-end and back-end that it’s starting to get in the way of success.
Banking, auto financing – what’s next for Sopra Banking Software?
Eric Bierry: We’re continuing to innovate our solutions to address the ever-changing needs of our customers in banking, auto finance, and beyond. A key element of this is partnering with fintechs that are introducing cutting-edge experiences to the auto financing space.
For example, we’re currently working with Vero Technologies, a wholesale financing technology and loan servicing platform that recently closed an $8.5M Series A funding round. Specifically, we’re working on a commercial product that will make Vero’s technology available to the wider wholesale finance market with similar large-scale financing ambitions. There are a lot of other technology and innovation partnerships in the works as well.
Our focus is to help banks and lenders from around the world make financial services accessible to everyone, everywhere, at any time, through digital technologies. As far as new industries, there’s opportunity for companies in any industry to offer financing – even if it’s something they’ve never been able to do before. We’ll be here to help power it.