Automatic financing goes blockchain
As the mobility industry continues its digital transition with a variety of vehicle sales platforms expanding their capabilities – particularly in financing – the complexities of vehicle financing and the tons of documents generated in the process are paramount. for innovation.
This modernization is underway, fueled by blockchain smart contracts that reduce the paper load to virtually zero while speeding up funding decisions from days to minutes.
In a conversation with Karen Webster, CEO of PYMNTS, Taimur André Rashid, CEO of Berlin-based vehicle finance company Auto1 FT, discussed recent developments in smart contracts running on the Ethereum blockchain, the benefits for dealers to seeking funding to buy cars for inventory and ultimately for consumers.
“A lot of finance companies and even the car sales platform have flashy front-ends, beautiful websites, but the background processes are still old-fashioned,” Rashid said. “We had to completely reinvent ourselves. The only way to go this route is to be fully automated and to be able to supply to anyone in the market. We did it.
Auto1 first announced the switch to smart contracts running on Ethereum in July, in an effort to streamline auto financing which continues to be the heaviest aspect of buying cars – combining all the different contracts on all platforms in one contract.
“We have completely converted to smart contracts,” he said. “Each new vehicle that we integrate to finance [for dealer inventory] is a smart contract, and we won’t go back. “
See also: Auto1 FT Launches The First Automotive Financing In Europe On Ethereum Blockchain
Fast, simple and digital
The dealership’s integration into the Auto1 blockchain financing solution is managed through an online portal that provides the front-end vehicle purchasing experience. For them, being on the “blockchain” is completely invisible other than the speed associated with signing up and getting a decision in five to eight minutes, not three to five days.
“Our whole philosophy, our mission and our vision, is to make it fast, simple and digital,” said Rashid. “If you see our dealer portal, the front end looks super simple, and that’s the whole idea. They have a few data points, they can click on different menus, ”which will soon be“ a one-click solution ”like Amazon.
Auto1 FT is connected to the network of 7,000 dealers that make up AUTO1 Group, the largest online used car wholesaler in Europe. Currently, Auto1 FT provides financing to dealers for the purchase of used car inventory. Ultimately, the company plans to offer consumer finance.
After entering the wholesale business, Auto1 plans to offer fully automated financing to retail customers. Rashid said sales to consumers will come organically through the dealer network.
Read also: Auto1 online car marketplace plans to go public
Five minutes for funding decisions
Webster compared the blockchain approach to financing mobility to the connected economy, and Rashid said Auto1 FT’s growth model is aligned with the concept.
Understanding that the best way to capture the market is to deliver a demonstrably better end-to-end experience, Rashid said fully automated auto finance is doing it, at scale and quickly.
“We’re going to finance a B2B dealership in less than five minutes,” he said. “It may not seem that fast, but in fact B2B in European markets where you have to overcome a lot of regulatory loopholes is very fast.”
In contrast, he said the decision window for traditional bank financing is around five days for vehicles costing an average of 14,000 euros (around $ 15,000).
As to how blockchain funding changes or doesn’t change underwriting rules, Rashid said, “To be fully automated and digital, we had to go down the open banking route, reading statements from different dealers to gain insight. to date of their credit quality. We have a fully automated credit check on individual dealerships.
Auto1 has teamed up with a provider of credit information and open banking software that operates across the European Union “because we don’t want different standards when we go to Spain, for example, next year” , Rashid told Webster. This allows the company to verify an account, perform fraud checks and download large PDF statements still common in car sales in the EU.