As the equipment finance industry looks at the final stretch of 2023, the industry has undergone an uneven year in terms of overall confidence in the market. Back in June, the industry was looking at encouraging signs in the market, but the September confidence index showed new business volume down 5 percent year-over-year.
These market challenges are expected to persist into 2024, which means many equipment lease and finance companies will continue to look at ways of creating more efficiencies in their operations.
Adopting more digitalization in their contracting and back-office workflow processes is one way to achieve greater efficiencies, and the latest Equipment Lease Finance Digital Transformation Index shows this adoption rate continues to grow throughout the industry.
According to the latest Equipment Lease Finance Digital Transformation Index, the rate of adoption for digitization of back-office documents has increased by 31 percent over the last four years. However, this rate of adoption actually decreased by 4 percent over the last year, largely mirroring the sluggish environment for capital spending on equipment. According to a Reuters report earlier this year, new orders for key U.S.-manufactured capital goods fell more than expected in March and shipments declined, illustrating where business spending has not been as resilient as consumer spending in the current economy.
The equipment lease and finance industry continues to look for digital transformation across the entire spectrum of operations, a key adoption strategy to modernize workflows of processes and equipment purchase documents. This digital finance activity is different from online purchasing in that it represents the conversion of back-office processes from paper to digital assets.
As the purchasing experience of business equipment has become more digital and the critical need during Covid to transact remotely, this combination led to the adoption of more digital processes and transactions through digital channels. This trend has continued in the years since the pandemic, although at a slower pace due to the sluggish and turbulent economy at times due to rising interest rates.
Equipment purchasing and leasing transactions are being modernized today, with online channels opening every day to make the transaction more efficient. In particular, lenders and lessors are now looking for seamless, automated and compliant ways to transact and secure the benefit digital offers over paper. Lenders, third-party providers and equipment lessors are now leveraging digital ecosystems that are purpose-built to handle the industry’s origination channel diversity, eliminating the complexities around managing various multi-channel assets post-execution, and drastically reducing operational and time costs.
Why the Industry Continues to Focus on Digitization
eSignatures are an electronic symbol, sound or process attached to, or logically associated with a contract or other record and executed or adopted by someone with the intent to sign the record. Parties to the transaction sign electronically, either in person using an electronic signature pad or other signing device, or remotely by logging in to a secure portal.
An eSignature is more than simply a scanned, digital version of a “wet” ink signature. The keys to enforceable eSignatures are attribution, intent, and authority. The goal is to authenticate that if Jane is a party to a leasing contract, it was truly Jane who signed it. Authentication methods include username and password, answering security questions, two-factor confirmation through text message, and biometrics such as fingerprints or facial recognition.
The authentication aspect of eSignatures offers distinct advantages over wet signatures. In a traditional process, when a customer signs a lease, how do you ensure it’s truly that customer’s signature? Maybe a salesperson witnessed the signing, or in some cases, a notary. Yet if the customer later disputes the signature, it can be challenging to prove in a court of law that he or she signed it.
But with an eSignature, companies have an authentication method in place, with the right evidence to prove that customer is who they said they were, along with proof of a signed agreement.
In the face of a global pandemic, companies that pivoted to eSignatures proved they could be implemented quickly, affordably, and effectively. Now that businesses are rebounding and equipment leasing and financing is primed to surge forward, industry players should recognize and act on the reality that eSignatures and digital documentation is the future.
Like eSignature solutions, eContracting is also recognized as the standard for the equipment leasing and finance industry. It provides the ability to digitize the process from loan origination—with brokers or directly with lessees—through to accessing warehouse lines, and securitization on the secondary market.
Today’s leading solutions are providing lessors with Digital Asset Certainty – trust that an authoritative copy or Digital Original loan document has a tamper-proof, auditable chain of custody and control that offers all the legal and enforcement rights of a paper contract. The robust and trusted digital platform accelerates transactions between customers, brokers, lessors, warehouse lenders, and investors, allowing for quicker access to capital.