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Blockchain Technology Really Could Be the Next Big Thing

Sparring technology providers makes the blockchain opportunity less clear

You’ve heard all the hoopla about cryptocurrency values — the  currency you can’t touch. It’s all very confusing and exciting – and even a little questionable. But what’s often overlooked is that the real value of Bitcoin and other cryptocurrency coins are the platforms and programs driving them. Blockchain technology is the real gold behind Bitcoin. The answer to the question everyone’s asking: How do retail operations run profitably in a sharing, on-demand and subscription-style economy? Blockchain technology is practical, surprisingly straightforward, and an answer tailor-made for automotive retail.

What is blockchain technology?

Google “blockchain technology” and you’re sure to find a few very dense definitions. Let’s simplify: First, blockchain technology is not Bitcoin. It’s the program that Bitcoin uses to create the currency valuation and on which activity takes place. Second, it’s a sharing-based ledger management technology. Think Google Docs, but you can’t change someone’s document or input; you can only add your own.

If there’s a mistake, a new record must be created. By allowing digital information to be distributed but not copied, blockchain technology opens the door to the secure sharing of data on a decentralized platform, creating transparency, eliminating unnecessary steps, reducing cost, and enabling things like micro payments for limited services. It’s very secure, scalable and massively disruptive to the entire industry.

How does it work for automotive?

Blockchain technology is disruptive, but in a good way. And while we in the automotive space often get a reputation for being slow to adopt new technology, with blockchain, it’s different. Automakers and finance companies are working with tech companies, forming partnerships, and investigating how they can use blockchain technology to build efficiencies and speed processes.

One area is supply chain operations. Think about how complex the connected automotive industry must be to manufacture and market a car. Suppliers across the globe are connected to hundreds of systems, and are dependent on data from just as many sources.

The simple connectivity and compliance of all the various vendors and elements require entire IT departments to coordinate, and billions of dollars to manage. Blockchain has the potential to dramatically streamline that data and IT infrastructure, creating a single and secure source of real-time information.

Here’s an example: with blockchain technology, the scale, severity, and cost of a recall could be minimized. Thanks to a more direct and decentralized data system, a supplier’s defective part could be identified and more quickly changed across the assembly line.

But that’s not all. Toyota Research Institute, along with MIT Media and others, began exploring the role of blockchain technology with autonomous vehicles and the connected car. By collecting real-time driving data and storing it in a blockchain, they’ve been able to provide more transparency to insurance companies, which in turn lowers rates and provides more accurate, real-world driving data.

Here’s the thing: better communication on the supply chain and lower insurance rates are a mere drop in the bucket compared to the real retail value of blockchain technology. As vehicles become “smarter,” blockchain technology would enable the recording and verification of transactions. Toyota Financial Services joined with the R3 Consortium, a collaboration of over 50 banks and corporations, to explore distributed ledgers and automotive financial services. Why? Perhaps because blockchain enables the on-demand economy of services and transportation. On-demand cars, insurance policies for limited use, subscription services…blockchain enables smart contracts, which in turn powers up additional revenue streams.

Revenue opportunities are dealership opportunities

Unlike automakers, retail-side applications aren’t as fully developed. There seems to be three core areas of opportunity: management efficiencies, such as the streamlining of documentation, finance workflows such as payment services, and contract management, including lease payments.

There’s also an opportunity to leverage blockchain in the pursuit of additional revenue streams such as car sharing, dealer-side subscription services, service scheduling and payment. Blockchain would enable the transference of data among consumer, dealer, and any third-party provider, and do so with little cost via a single and secure source of data collection and transference.

A dark vendor storm cloud?

The problem? They might not happen. Technology providers have shown they don’t get along well enough to play together in something as inclusive as a blockchain sandbox. In a recent survey[1], 85 percent of dealers said integration between platform providers in their stores needed to be better. Over 70 percent said it was only somewhat likely that their service providers would move to the open integration model required to support the evolving sales and finance processes. The top two reasons? They think vendors are more interested in protecting the status quo and vendor competition.

While that may seem to be a minor thing, it’s not. In the same survey, 86 precent of dealers felt that vendor cooperation would facilitate greatly reduced start-to-finish transaction times – a key shopping criteria. Dealer managers are saying that the fundamental dysfunction between technology companies harms productivity now, and will be a serious impediment to a future of sharing-driven technologies. The trouble is that playing together will soon become a required attribute. Those vendors who resist will only get in the way of their clients.

The reality is that to fully maximize a “sharing” technology, vendors must be willing to share more than lawsuits. Today, most dealer-side technology companies struggle to co-exist over the basic APIs. There are court battles between the largest technology providers, day-to-day battles between small players and major companies – all making it very difficult for others to do business on platforms sold to dealers as a universally compliant. All that does is keep dealerships from finding more productive ways to use technology.

If vendors are able to share without fear of intellectual theft and compromise, blockchain technology can save dealers money, time and effort through deeper and better integration. The end result to greater collaboration would be better and more profitable retail systems – happier dealers with additional revenue streams due to vendor innovation and collaboration.

Pete MacInnis
Pete MacInnis
Pete brings 40 years of experience in automotive finance and technology to his role as Founder and CEO of eLEND Solutions™.   Founded in 2003 as DealerCentric®, eLEND Solutions™ is a privately held automotive FinTech company focused on deal generation solutions for the retail automotive industry.  The platform specializes in digital credit, identity, and finance solutions for remote and in-store shoppers - designed to accelerate conversions of digital end-to-end purchase experiences - concluding with a fundable, transactable deal structure. Pete began his career with WFS Financial where he spent 14 years in various management positions that helped grow the company to over $4 billion serviced.  Pete left WFS and co-founded auto finance company Onyx Acceptance in 1993. Onyx originated over $14 billion in auto loans, went public in 1996 and was acquired by Capital One in 2005. 

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