Making A Positive Impact Through Innovative Business Practices

As automotive finance providers, we operate in a highly dynamic and fast-paced industry, where factors such as technology, compliance and consumer trends can present challenges and opportunities for motor retailers. Our collective aim throughout the sales and marketing process must be to provide innovative and sustainable solutions for the end customer.

Given this context, the FCA’s recent comments on motor finance have been encouraging. Speaking at the 2018 Credit Summit in London, Jonathan Davidson, Director of Supervision – Retail and Authorisations at the FCA, said that the growth of PCP contracts in the motor finance market is a “good example of an innovation that has had a significant impact,” and that this type of innovation “paints a really attractive picture” of the motor industry.

This positive outlook is certainly consistent with our view of the industry, as I’m sure it will be for every finance provider that believes in the robustness of their products and puts ‘treating customers fairly’ at the heart of their operations.

However, in its recently published 2018 Business Plan, the FCA reiterated the fact that it will be undertaking further work on responsible lending, particularly the approach taken by motor finance lenders to assessing creditworthiness, including affordability. It’s imperative, therefore, that we challenge ourselves to do better, helping dealers to match the right product to the right person every time. For many dealers, this will involve business model diversity – looking at new ways to ‘innovate’ and secure outcomes that are positive for them and, importantly, their customers.

We see innovation and change as two sides of the same coin. ‘Innovation’ is a trendy word with which companies of all shapes and sizes often try to associate themselves. But innovation can also refer to changing existing company practices, as much as it does to inventing something completely new. This type of cultural innovation, however, can be less popular and often faces greater resistance.

That’s because making impactful changes to business culture often isn’t easy. If sales figures are on target and the business is doing reasonably well, then why rock the boat and try to do things any differently? However, complacency or simply waiting to follow the lead of others cannot be a sustainable approach for companies in a face-paced industry like automotive. Business leaders who manage to overcome the fear of change and actively challenge the status quo have more to gain than lose.

As Jonathan Davidson at the FCA said in his speech, “a successful business model also relies on having a healthy firm culture,” where sales people are “encouraged to be curious and questioning”. Without this, he adds, “firms might not realise that their business models are unsustainable and can lead not only to reputational damage, but also to the kinds of costly interventions we (the FCA) have been making.”

This is why ALPHERA has established a partnership with the Institute of the Motor Industry to promote the uptake of a new education and accreditation scheme for finance and insurance sales specialists. The scheme provides a platform for self-regulation to support compliance, introducing shared core values across dealerships.

In the wake of PPI mis-selling, consumers are more alert than ever to the risk of being sold an inappropriate finance product. Dealer sales staff must have the skills and knowledge necessary to properly qualify a customer’s needs and deliver a clear and transparent presentation that enables informed decision-making.  An accreditation pathway, robustly assessed and backed by the IMI will establish a universal kitemark and give consumers the confidence they need to trust our industry in everything we do.

This type of innovation is more than simply complying with a regulator’s demands. But rather an opportunity to instil the culture and expertise needed to make ‘treating customers fairly’ a core value for everyone in the business of selling cars.

By Gerry Kouris, Marketing Manager at ALPHERA Financial Services