Digital captive finance companies

Why now is the time for digital OEMs

For decades, the automotive original equipment manufacturer (OEM) captive finance business has been quite stable and lucrative. Today, however, the status quo is being challenged by the future of mobility (FOM), regulatory changes, financing digitalization, and more.

Disruptive forces in the captive finance market


Source: Deloitte “Future of captives: What will be the core businesses of automotive captives in 2030?”, 2018

Value in the FOM ecosystem will be derived from consumer-centric data, systems, and service-oriented business models. Revenues, market share, brand value—everything OEM captives have built over decades—is at risk or is at least going to change. It’s likely that captives will face more industry disruption in the next 10 years than they have in the previous 30.

We see the future of mobility propelling captives more deeply into the services segment as they derive less and less of their profits from traditional loan and lease financing. This comes with a fundamental mind-set shift in the customer relationship from focusing on one monthly customer transactions to many transactions per month—likely several per day in the not-too-distant future.

If captives can create innovative, flexible services that add value and provide a seamless customer experience in this dynamic environment, consumers and the market will likely reward that leadership.

Developing a future value proposition

Captive finance companies seeking to protect market share and grow revenue should take steps now to strengthen their future value propositions against disruptive entrants that have already launched mobility-related services into the marketplace.

Many of the entrants encroaching on captives’ turf are highly experienced at using digital platforms and tools to acquire and retain consumers. To defend their revenue stream, captives will likely need to become more digitally proficient and extend offerings beyond traditional vehicle financing and leasing into adjacent and new markets.

Fortunately, captives have existing assets that can help deliver tomorrow’s financing solutions, as well as a stronger brand identity than many other financial services players. Consumer’s multiproduct requirements at the moment they purchase a car create a natural cross-sales opportunity. Auto OEMs also have new monetization opportunities stemming from the skyrocketing volume of in-car transactions as connected cars become a vehicle for consuming services.

Finally, advances in technology and data analytics provide an opportunity for digital captives to improve the end-to-end user experience for traditional vehicle purchasing or leasing by enabling a seamless, omni-digital process that extends from initial research through delivery.

OEM captives have existing assets to deliver tomorrow's financing solutions

Where to play and how to win

With so many potential places to play and ways to win, captives should carefully evaluate various alternatives before selecting their path forward:

• What is our winning aspiration?
• Where will we play?
• How will we win?
• What capabilities must we have?
• What management systems do we need?

As prospective digital captives consider their future in an expanded financial services landscape, it’s important to remember two things: Each potential path forward presents advantages and disadvantages; and each digital captive will start in a different place based on its brand equity, assets, risk tolerance, and strategic vision.

Building the playbook