Leasetech: A Driver of Change

Is technology changing consumption habits or are consumers setting the tone for the digitization of companies? The 21st century will go down in history as the era of unicorns and Latin America seems to have positioned itself as an unstoppable player in this game of billions along with the US and China. But how can technology contribute to the leasing industry?

Surely you are familiar with many of the sectors that currently have the suffix "tech," such as foodtech, fintech, healthtech or edtech. There are many more and they all have one thing in common: they respond to a sectoral need through technology.

In these first 10 months of the year, the number of Mexican unicorns has doubled and of the eight that currently have a valuation of at least US$1 billion, five belong to the fintech sector, an industry that is growing at a dizzying pace. In 2021, the number of fintech companies in Mexico grew 16 percent, reaching 512 startups that make up the country's ecosystem, as can be seen from the "Fintech Radar 2021" prepared by Finnovista, in collaboration with the Inter-American Development Bank (IDB) and the Pacific Alliance.

The explosion of fintech in the region has been the result of the pandemic that paralyzed the world for two years and forced both consumers and companies to continue operating and buying digitally, something that in some areas of the world was still a minority. In the case of Mexico, for example, technology provider companies, such as Mifiel, noted how interest in financial technology solutions increased when the health crisis began and especially from March 2021, when the demand for technological services skyrocketed. Between March and December 2021, these companies quintupled their results compared to the same period in 2020.

The pandemic has had a significant impact and has caused many companies to consider making a change of this type; these are important changes in the way contracts are made and how the financial area of a company operates.

Like other industries, the automotive sector, and in particular, leasing, has undergone changes and is in a full transformation and expansion. Data from Fortune Business Insights projects the global auto leasing market to grow from $82 billion in 2022 to $131 billion in 2029 at a 6.9 percent Compound Annual Growth Rate.

Large companies, such as TIP México, specialized in the leasing and administration of transportation equipment for companies and individuals with business activities in Mexico, opened the digital option and it currently represents approximately 25 percent of the leases granted.

This year, the concept of leasetech was introduced for the first time in Mexico through BitCar. What does it consist of? The term refers to new technological solutions that seek to provide access to consumers in search of a used or new car, putting users at the core of the experience and allowing them to create a “customized” plan; that is, tailored to each person to respond to their specific mobility and economic needs. To achieve this, it is necessary to have a platform that has been developed with the user and car dealers in mind. The key when we offer an online service or product is to give control to the user, who decides the final specs within a range of options, enabling your customers and optimizing your processes in order to have a greater chance of success.

Additionally, it is essential to build this technology not only thinking about a digital transaction, or the internal operation of the company, but also about the person who is going to use it. The use of the web to buy and consult information related to cars has increased in the last three years. Currently, 94 percent of consumers in emerging markets search online and fewer and fewer people visit a dealership  according to the XIII annual report Cars Online, prepared by the consulting firm Capgemini.

A survey carried out by MercadoLibre indicates that 7 out of 10 Mexicans rely on the internet before buying a car, either to compare prices, consult existing models on the market or to look for other types of information. These trends are compelling reasons for us, as operators in the vehicle leasing sector for individuals, to offer a platform where Mexicans can find quotes, compare models and prices, and select their options according to their preferences.

The other side of the “digital” coin is within the company. In this regard, technology also makes it possible to increase effectiveness and streamline all administrative and financial processes in the lease process. There are two technologies that today are already part of the technological systems in leasing and guarantee the security of all contracting processes: on the one hand, the performance of biometric filters as antifraud systems and, on the other, the implementation of blockchain in the process of advanced electronic signature of contracts and promissory notes.

The use of blockchain technology had been used mainly in credit instruments and, above all, in financial and banking operations. If entities in the sector rely on this technology to move millions of pesos, it is because it is positioned as a very reliable tool against cyber fraud, such as identity theft or hacking.

The expansion of information technologies for financial services is significant not only in terms of the value and number of digital transactions, but also the number of people. Statista data estimate that this year will close in Mexico with a total of 46.6 percent of fintech users of digital payments.

This growth is also reflected in e-commerce data. During 2021, online sales in Mexico grew 27 percent compared to 2020 and reached a value of MX$401 billion, according to data from the Mexican Association of Online Sales (AMVO). It is the third consecutive year with unbeatable growth that has positioned Mexico in the Top 5 worldwide for the magnitude of this market and the second-most profitable in Latin America, after Brazil, with the highest number of online sales.

The digitization of the automotive sector is here to stay, driven by the contextual needs of the country and of Mexicans and reinforced by the facilities and advantages it offers, such as safety, comfort and efficiency. We are currently in an omnichannel phase, where two modalities are coexisting: traditional face-to-face and remote.

Given the current context with the scarcity of vehicles, digital multibrand options are positioned as the best option to find the desired car and it is key to consider online services not only before making the purchase to make comparisons or to contract the service, but also in the post-sale, since that allows continuity in relation to the needs of the client, especially when it comes to leasing.