4 Ways Dealers Can Benefit From Blockchain Technology
Despite the jargon, the concept is pretty simple: to facilitate and empower the sharing of secure and transparent data
I know what you’re probably thinking. Blockchain is another one of those topics technology vendors throw around to show how smart they are, and to convince dealers how badly they need our expertise to remain relevant in the constantly evolving technical landscape.
With all the hype surrounding blockchain, bitcoin, and other cryptocurrencies, I can’t say I really blame you for any eye-rolling.
Blockchain, however, should not be dismissed as another fancy tech solution being shoehorned into automotive retail by overzealous vendors. It’s already very real, and many players are testing how it can benefit car sales and service.
Despite the jargon surrounding blockchain, its whole reason for being is really pretty simple: to facilitate and empower the sharing of secure and transparent data. That’s it.
Put another way, it’s a bunch of data blocks connected by a digital chain that are all related to a single topic—for example, a VIN number.
If used correctly, blockchain opens possibilities for additional revenue streams and lower operations costs for dealers. Here are four examples.
1. Registration and title-processing efficiencies
Just think: No more waiting 10 days for lender confirmation of title transfer. Thanks to blockchain, you can remarket a car immediately, and with data certainty. Leveraging blockchain technology to streamline registration and title documents is arguably the most relevant use of the technology, in terms of time and cost savings.
Instead of multiple online forms and software systems for in-state and out-of-state registration, a blockchain solution would connect all parties: buyer, seller, government, and third-party VIN and insurance databases. It would potentially make the process secure, lightning fast, and transparent across all data-exchange points.
As a result, it may also reduce chances for fraud. Just think about how useful blockchain could have been in eliminating the instances of storm-related title fraud in Texas and Florida.
2. Service and relationship management
Perhaps the most obvious application of blockchain is in the collection of VIN-specific data. Easier gathering of points of information—such as GPS, service, driving record, and driving tendencies—would definitely be a benefit in the era of over-the-air updates and connected cars.
But blockchain solutions can take this information beyond service. For example, it could enable more comprehensive and seamless owner driving history and behavior information, which would make service upsells easier and more powerful.
It may also make valuations more accurate, which would come in handy when the time comes to assign a trade-in value, market a lease pull-ahead offer, sell accessories, and more. This is where blockchain really shines, and something we could use today.
There are 4 million off-lease vehicles coming back to the market, many of which have unknown feature packages and equipment. Just imagine how profitable it would be to know exactly what a vehicle includes, both when buying at an auction and when selling it to consumers.
3. Ridesharing or subscription car ownership
Ridesharing and subscription payment programs may be the most valuable area of influence. A blockchain-based payment program could enable dealers to easily operate a subscription service, or perhaps a ridesharing service in their local area.
There are emerging models of need-based insurance that would also use blockchain to facilitate this sort of usage. If that sounds a little far out, it’s really not. In fact, with average transaction prices at or above $35,000, there is a real need for subscription-based options.
Consider too that vehicles sit idle most of the time, costing both individuals and dealers money. With blockchain solutions, that down time could be put to good use.
4. Maximizing value and lowering fraud within auto finance
When it comes to auto finance, there are a few ways blockchain will likely have a lasting, positive impact. Let’s start with the value of vehicle inventory.
Powered by blockchain, vehicles will turn from depreciating assets to incremental profit centers—a key component to the on-demand economy. Simple efficiency is another way finance companies (and dealers) will benefit from blockchain, in that it could eliminate or compress many of the existing validation steps and required documentation.
Currently, Toyota Financial Services (TFS) is investigating ways to leverage the technology, in conjunction with the R3 consortium, a network of more than 200 banks, financial institutions, regulators, trade associations, professional services firms, and technology companies working together on a blockchain platform designed specifically for businesses.
It’s my opinion that blockchain technology does one core thing exceptionally well, which is why it’s so important: It connects buyers, sellers, products, companies, and regulatory agencies together in a transparent and secure way. This, as a result, can be used to expand business and streamline operations.
And here’s the bottom line: Whether lender or automaker, large players are actively coming together with small and nimble start-ups in an effort to apply this technology. Why? Because it saves steps and creates efficiencies.
With all the testing and experimental programs taking place, the chance of blockchain coming to your dealership is already pretty good.
Pete MacInnis is founder and CEO of eLEND Solutions, a company specializing in online and in-store credit, finance, and deal-making solutions designed to create a more efficient, faster-moving sales and F&I workflow that helps dealers sell more cars in less time, improve profitability, and increase customer satisfaction. eLEND Solutions’ patented platform streamlines car selling by bringing more functionality online.