In case you didn’t notice, the auto industry in the U.S. is metamorphosing.
While it is hard to argue that the car dealer will go the way of the travel agent, it is equally fair to say that a healthy portion of the auto industry will become enmeshed in the shared economy. And this is not just about Uber.
There are at least a dozen quality startups taking aim at various elements of the auto industry, from hourly rental to shared used car purchasing. If I had to guess, I’d say around 20% or even 30% of the car business will go “shared.”
I know, what does this have to do with banking? Well, a lot actually. Beyond the fact that around 85% of transactions for new vehicles utilize some form of financing, the car share economy is creating a raft of new financial services opportunities — opportunities that portend others within the broad “shared” economy.
Consider, for example, HyreCar. HyreCar is a rent car services for Uber and Lyft drivers. The app allows users to rent vehicles for car owners like you and me for as little as one day. Obviously, this is an adapted Airbnb model. But within the HyreCar app, you will notice a “Low on Cash?” option. This would be a perfect opportunity to offer microfinancing, which HyreCar alas does not.
But beyond the obvious lending here, financing options can — and should — be incorporated throughout the shared economy. It is an anathema to me that Uber, for example, does not offer a financing option. Even that paradigm of disruptive ventures, Airbnb, does not allow for financing. I don’t see why it shouldn’t.
I don’t buy the argument that it is not worth the effort. Financing in the shared economy is not just about cashing on yield. Financing is a facilitator, a “remover of friction,” a “service.” It offers a means to a shared end. And the volumes could be pretty sweet.
To date, most of the “financial services” in the shared economy (and I mean for ventures that do not primarily provide financial services) has been restricted to the facilitation of payments. But to Stripe or Braintree a venture is not to deliver a financial services. Truth be told, the promise of banking APIs as espoused by Standard Treasury and the like does not appear to have been realized. Maybe Silicon Valley Bank will make it happen?
On the surface, shared ventures are seen as disrupters and interlocutors to more established business, but they are actual open doors to traditional business — or at least to traditional financial services. These “open doors” require credit risk management, underwriting expertise, and serious servicing chops. I happen to know a few shops that have such services in house — and not one of them is named Facebook.
Learn more about fintech innovation at Bank Innovation Israel, Nov. 10-11 in Tel Aviv. Request an invite here.