The Intersection of Data-Driven Financing And Industry 4.0
Before I start my topic on the intersection of data-driven financing industry 4.0, who’s familiar with the following quote from IBI Research and Fraunhofer?
This means that the whole system is bound to be revolutionized by new IT technology and new machine investors.
We unconsciously accepted this statement as a challenge two years ago and started to find a way to bring the two parties together.
Now, I want to introduce myself quickly and why others consider me qualified to speak on this topic.
My partner and I come from the classic Industrial IoT sector, where we learned how to collect and analyze machine data, regardless of location and machine manufacturer. We specialized in making this data available for internal reporting purposes.
At one day we asked ourselves the following question:
While this data is quite interesting for the manufacturers itself, who else can benefit from such information?
After numerous conversations with a wide range of professionals, we discovered that financial institutions could also leverage machine usage data to develop new flexible financing products.
While there was value to be created, banks had quite a few hurdles to adopt such technology due to the lack of technical expertise. Pay-per-use services were in demand from their customers, but they couldn’t keep up with it since of their lack of infrastructure.
And I stand here today, excited to announce that we developed this exact IT infrastructure that allows banks and insurance companies to enter the pay-per-use financing business very quickly.
I want to continue my presentation by sharing with you the exciting market opportunity that banks have right now for adopting IoT technology.
We’ve all witnessed the massive takeover of retail banking technology startups N26 and Revolut, causing traditional banks to lose about four percent of their market share. In Europe alone, that’s roughly a €22 billion revenue loss.
These new challenger banks did not reinvent the wheel; instead, they leveraged new technologies to personalize the modern-day customer’s banking experience.
Interestingly enough, my team and I see the same situation approaching corporate banking with their equipment financing market share at risk. If banks do not adopt new technologies and methods, such as pay-per-use financing, to serve the modern-day customer, then they could be on the verge of losing even more market share.
That’s why we created Linxfour.
We help bridge the enormous gap between industry 4.0 and the modern-day requirements machine buyers, financial institutions, and insurance companies must fulfill to prevent them from losing billions of dollars once again.
To do so, we have developed a platform that takes care of collecting equipment usage data by combining our 15 years of IoT expertise alongside our deep financial backgrounds to transform this data into scalable data-based financial products.
To better understand how data-driven financing works, let’s quickly review the structure of current financing methods.
When I embark on traditional financing, I always encounter the same repayment rate, no matter how much I use the machine.
This, of course, has disadvantages. On the one hand, I encounter issues managing cash flow, as well as new regulations, such as ISF16, instill multiple accounting hurdles, and so on. I think we can agree that this traditional method is a bit outdated.
But thanks to new technology like IoT, we can now offer flexible repayment rates driven by personalized financial products without compromising scalability. As a result of such a solution, we can eliminate all that heavy administrative weight that makes traditional financing so outdated.
We enable usage-based methods by analyzing the machine’s produced output, capturing these usage metrics, and linking this information to one centralized system that generates our financial end-product. Payment rates are pegged to the machine’s usage, so if you produce less, then you pay less, and vice versa.
Our financing process becomes incredibly beneficial when you’re in your ramp-up phase, purchasing new machinery, restructuring your plant, or undergoing a planned production shutdown. And of course, your balance sheet mimics the effects of such an advantage. This form of higher flexibility allows banks to earn more money per financing contract in the long run.
Now I want to tell more about how Linxfour’s platform works. In simplest terms,
We collect the usage data from different equipment types (independent from the OEM)
We link the data to financial contracts
We push the data to banks
In other words, we take care of the flexibility that originally stifled the bank’s adoption of such pay-per-use services. Quite often, traditional financial institutions cannot successfully execute their own system because of their current IT know-how and internal processes.
With regards to point number one, “Collecting usage data,” we’ve been successful in implementing our comprehensive connectivity to interfaces and machines after having digitized so many equipment types ourselves. We’re quite familiar with all the systems out there and have built the right platform to work alongside existing interfaces.
We begin utilizing a machine’s usage data by first retrieving the information, to which we then standardize, and finally, bring it to our platform. As soon as the data in on our platform, we start validating and analyzing the information to see if this data is was manipulated, tampered with, or falsified.
Once we validate that information, we transfer it to the customer and tie it into a specific financing contract. This brings me back to point number two of “linking the data to financial contracts.”
We display precise calculations on a dashboard to which the bank then sees how much the manufacturer produced. As a result, the bank can analyze the data to better understand the additional value usage-based financing brings to their business.
To further add to point number three, Linxfour can integrate itself into the bank’s existing system without encountering high integration costs or efforts. Thus, banks can quickly jump on the data-driven financing trend without having to invest a lot of themselves to build a broad IoT technology infrastructure.
After describing out process and various benefits usage-based financing has to offer, I would like to show you a short live demo so that you better understand how Linxfour is solving the data-driven financing market demand together with our existing financing partners.
Everything starts with calculating the right financing price with our “Click & Finance” tool. With this instrument, you can easily calculate the price per-unit in just a few simple steps. In this example, we can see that the price per produced unit costs 91 cents. Having that in mind, the bank and the selling OEM will not offer the equipment at the full one million euro price tag; instead, they will tell the purchasing partner that they can buy the machine for 91 cents per produced unit for the next six years.
As soon as the equipment buyer accepts this offer, the contract between the financing partner and the buyer closes to which v steps in and begins tracking and collecting the producer’s usage-data.
With the collected data, we help banks analyze the performance of each equipment they financed. They can visualize the different revenue and interest earned by each flexible financing contract in comparison with a traditional financing contract. Overall, banks can see whether or not the contract’s duration affects their interest earned in the long run. Banks can segment this information per region, customer, and equipment type, to name a few.
By analyzing such data, Linxfour provides banks with answers to the following questions:
How many machines did I already fiance with usage-based financing?
What is the overall financing volume?
Which equipment types are performing best? Worst?
Cluster customers, equipment types or regions into profitable categories
How much was the equipment used? This becomes especially interesting for residual value and risk management purposes.
Why did I earn more money or less money for the period?
By having these answers, banks can initiate personalized services to develop stronger relationships with clients and users. As a result, banks can leverage user information to generate better insight into what their customers want and can create better-tailored services to meet their demands without compromising scalability.
So as you’ve learned, data-driven methods and usage-based financing both possess tons of benefits and deliver insight for all participating parties, especially for the financer.
Whether it be additional deal flow, the ability to create personalized products and services, regain lost market share, or generate new business intelligence, Linxfour diversifies your service offerings.
We place your business in a position to meet the evolving demands of the modern-day buyer and seller.
Thank you!
About Linxfour
Linxfour is a European leasing company, based in Austria, providing Pay-per-Use financing solutions to manufacturing companies. Using proprietary IIoT (Industrial Internet of Things) technology and AI-driven risk management, we are unique in underwriting true utilisation risk. Operating across different countries and industries, we are committed to helping businesses finance equipment with our unparalleled solution.
Linxfour: Transforming Equipment Finance
