Manufacturers and their captive finance companies are facing disruptive technology trends that are impossible to ignore — and the emergence of blockchain is one. But, to make blockchain a reality, companies need to stop racing towards innovation and start with a community.
“Maybe it isn’t so much about the tech, it’s really about the ecosystem,” Chris Ballinger, chairman and chief executive of Mobility Open Blockchain Initiative (MOBI), told Auto Finance Excellence. Ballinger, the former chief financial officer and director of mobility services at the Toyota Research Institute Inc, left his position with the OEM to found MOBI.
The consortium’s goal is simple: jumpstart and develop the community necessary for blockchain to become a reality. So far, participating companies include BMW, Ford Motor Company, General Motors Company, and Groupe Renault to name a few. Faraday Future, an artificial intelligence mobility company, and KAR Auction are the most recent additions.
Comparable to smartphones, the internet, and email, blockchain is filled with hype and companies want to get involved in innovation, Ballinger said. But blockchain is also a technology that requires everybody to be hooked up. “Everyone needs to be on the network before it has its powerful effect,” Ballinger said.
The need for a network is what makes blockchain innovative. Blockchain is a digital public record used to store transaction data across many computers. It’s inherently a decentralized system, meaning that no one entity controls or operates blockchain — similar to how anyone across the globe can use the internet but no country, person, or company owns it.
By leveraging blockchain, cars manufacturers will be able to share data, buy and sell, pay for infrastructure, communicate with other vehicles, negotiate rights of way — but there has to be a standard of doing it. For blockchain to have a significant impact on the auto space, a community ecosystem is vital, and the industry hasn’t established one, David Luce, chief operating officer, told AFE.
For example, if every OEM creates its own language, no agency, no toll authority, no road infrastructure provider would have the patience for trying to figure out 10 or 15 different languages of the prominent manufacturers and incorporate the languages in its process, Ballinger said. Therefore, the key to creating a healthy community is setting a single blockchain language for captives, dealers, manufacturers, and lenders.
Once that single language is established, finance companies can benefit by leveraging blockchain to fund more contracts and enjoy easier title transfers, and a lender’s volume can improve through the use of smart contracts, Ballinger said. Smart contracts are computer programs that can automatically approve borrowers based on predefined credit metrics.
While lenders already utilize automated decision tools, blockchain makes the transactions more secure and doesn’t require an intermediator. Through a community database, “you can reduce that cost and the friction significantly,” Luce said. “You can enable entirely new ways of thinking that’ll benefit dealers, finance companies, and captives.”Like This Post