Recently I heard a story about someone who was getting a private lease car. In the Netherlands, this is becoming more and more popular because you pay for the use of the car, not so much the ownership of it. And when you think of it, it doesn’t really matter whether you own the car and drive it or if you just lease it and drive it. The car is still the same, the fuel efficiency is still the same and it still drives the same. Ownership is no longer sacred, something we know from the use of cloud-based services like Amazon, Azure and Google. But this blog is not about the end of ownership!
The reason I am sharing the story with you is that the person who was getting the car needed to show that he could afford it. It’s like when you want money from the bank, you need to prove that you don’t need it. That might be a bit of a platitude, so let me rephrase that: you need to prove that you’re able in normal circumstances to pay the fees associated. In order to prove his creditworthiness, the leasing company Justlease requires several documents pertaining to both income and spending. The last thing you want as a driver of a private lease car (or as a supplier of such a car) is financial problems. Since a car needs to be insured as well, they also wanted to know his history with regards to car damages and claims. But much to my amazement they required PDFs showing recent bank statements of a full-month as well as the monthly income. I have a number of questions / remarks with that. Why would you require something on paper (or the digital equivalent of that, the PDF)? And secondly, you are giving much more information than is needed! For the damages and claims another piece of paper was required, showing the claim history.
Focus on the important stuff
The financial information required is all part of a quality mark so consumers know what they are buying (and what is included), can afford it without getting into problems and the leasing company knows the client is able to pay the monthly amount. I understand that they would like to have a PDF so that they can look at it but, that is not only involving a human to interpret the documents / PDF, it is also suboptimal in another way. You’re not getting a direct answer to question can this person actually pay the monthly fees. Because this is a snapshot of a moment, not a longer period where more relevant information is shown. And with regards to car damages and claims, would you rather not get the actual data about someone’s way of driving as well as the damages? We need more than the number of prangs to have good insight. Leasing companies estimate the number of repairs based on an average of all drivers for a car model. Knowing how this person drives, both historically and currently will help determine if perhaps a higher amount for repairs is needed or even lower amount!
What if we would develop a service that would look at a person’s financial data for a given period of time and with specific question: is this person able to pay the monthly fees? The only thing that you need to do is translate the human interpretation into a set of rules that can be executed on a financial data set. For instance, let’s say that the monthly fee is about €300. Would this person be able to pay this fee over the last six months? By simply deducting what’s going out and what is coming in we get a quick answer to that. The answer could be a clear yes, this person has enough money to pay the fees. It could also be a clear no; this person already has no spending room anymore without jeopardizing their financial health. The answer in between, let’s call it ‘perhaps’, is more difficult. This might require a human to step in and make the choice until such time that AI can do that on its own.
How am I driving?
When you look at the driving data, it’s even more easy. I’ve installed DriveGuide as a way of automatically according and tagging (AI!) all the rides that I make with my car as: home to office or business or personal. It also gives me a score how I’m driving. Just tally all the scores, calculate the average and if it’s over a certain number I’m a careful driver and you probably do not need to worry about the percentage calculated repairs and tire replacement. Justlease with Driveguide is in the forefront of such IoT driven data collection and the use of the intelligence therefrom.
With the new PSD2 directive in Europe and the access to financial data that it provides to so-called Fintech companies this is something that could be developed quite easily, not only by banks! But I would argue that also banks could and should offer a service like this. I think that it will be an improvement over the current paper/PDF based processes that can also impact the bottom line. Better data makes for better decisions. And once you have this service and of course you need to make it available to your customers and their developers. Of course, you do that as an API, for a number of reasons. The first reason is simplicity. APIs are widely used, and relatively easy to deploy. Developers know what they are and can integrate them into their applications. Second reason is management and monitoring. It also includes security, making sure that only the person who is allowed to use it, uses it and have the consent of the data on (i.e. person whose data you’re checking). Lastly of course there is the possibility of making this into a business model. This requires the capability of monetization, a pay-per-use set up or even a subscription model with a monthly fee.
In order to do that you need an API management solution that is capable of the three things I have just described: a simple process to publish and subscribe to an API, management and monitoring capabilities and the possibility make money. If you’re looking for such a solution read the white paper on API management in order to learn what is important in such a solution and how solutions from different vendors compare.