Over the last several years, many equipment finance companies have made important investments in their own digital transformation strategies for the business side of their operations. This was highlighted during the pandemic when organizations needed to digitize their back-office processes to become more efficient, especially with paper-based contracts and documents.
Like many businesses in every industry, contracts serve as the backbone of relationships between lenders, partners, and customers such as organizations with heavy-duty transportation fleets. With the advancement of technology solutions that enables digital transformation, companies today are reducing their reliance on paper-based contracts to improve their overall speed and efficiency of doing business, while at the same time realizing more secure transactions that adhere to stricter regulations for equipment financing.
This is also important when storing documents, where digitization helps to protect who has access for digital transfers between the equipment finance provider and fleets when a contract is funded.
Equipment finance companies and organizations with transportation fleets today recognize that paper management is a large issue in the industry. These organizations understand the need to reduce their reliance on physical paperwork and the number of physical copies that must be distributed to each party involved in the transaction of a contract. This is also a concern in many industries that also work with fleets. As an example, in the construction industry, where many companies have contracted partnerships with transportation fleets, about 7.5% of all documents end up getting lost, which is a significant reason why keeping everything digital today is extremely effective1.
We still have a very paper-driven culture in equipment finance, and it is important to transition to more digitization, which will solve several key pain points for the industry. First and foremost, digitization will significantly improve the accuracy and added costs to manage paper, keeping up with revisions, etc. What’s more, a paper-based environment can result in outdated contracts being used, which usually leads to lender rejections, and paper returned to the truck dealer or business which further increases the risk of exposure.
Equipment finance providers have clearly recognized the importance of evolving from paper only, to more of a digital contracting environment. As a result, they have seen significant enhancements including faster processing, streamlined workflows and a more reliable, trusted document handling system. Managers like the ease of logging in, reviewing, and signing their documents which automatically pushes the document to the next approver.
What’s more, aside from e-signatures and digital contracting, the electronic storage of these contracts is equally important to all parties involved. As an example within transportation, digitizing the storage of documents is important to protect who has access to documentation or digital transfers between the equipment finance provider and the company when a contract is funded. What’s more, digitizing documentation is also important in the event of an audit.
Digital contracting will only grow in prominence, so equipment financiers should recognize this if they want to be considered leaders of tomorrow. According to industry data, the global digital signature market size is projected to grow from $7.4 billion in 2023 to $34.8 billion by 2028 – a CAGR of 36% during that time2. Leading companies in their respective industries will quickly turn toward digitizing their contracts and signatures.
The next phase of contracting digital transformation will leverage workflow processes such as e-contracting, multi-channel origination, digital certainty, auditing, document governance, security, post-transaction asset management and analysis tasks across all parts of the document journey. Each of these areas may seem mundane to the average person, but they each remain critical for the industry to evolve to the next chapter of digitalization.
This advanced process will create an environment of centralized data management across an entire equipment finance portfolio, allowing equipment finance professionals to access and view metadata across various origination channels and asset classes.
What’s more, it will help to control and track access, manage status changes, and transfer control of digital documents while utilizing sophisticated granular controls and permissions to allow for departmental separation and visibility. All of this will result in improved speed and process efficiency for the entire industry.
To be fair, some organizations have not adopted this digital approach as quickly as others. Some organizations point toward needing to change legacy internal processes, some users resisting to learn new technologies, and the potential increase in cost of software. However, as more organizations step in this direction, delaying this adoption will result in a significant competitive disadvantage.
With these enhancements the equipment finance and transportation fleet industries can advance in digital transformation during the origination transaction, as well as the back office between original equipment manufacturers (OEMs), dealers, equipment financiers and the fleets themselves.
1: https://www.itbriefcase.net/adoption-and-trends-of-digital-signatures-in-the-construction-industry
2: https://www.marketsandmarkets.com/Market-Reports/digital-signature-market-177504698.html