Four Ways FinTech Improves Lease Management

The global pandemic reshaped the leasing industry. Entrepreneurs who preferred buying equipment on cash switched to equipment financing – lease due to working capital problems. It allowed them to deduct rentals from financial statements, overstate profits, lowering shareholders’ dividends, and maximize returns.

The flexibility brought by leasing has made this industry extraordinarily competitive and agile.

In 2023, the growth of lease providers depends on finding new ways to drive revenue and transaction volume. After all, attracting customers with low rentals won’t cut the deal. So, why not address the entrenched legacy financial technology (FinTech) for lease management?

FinTech has demonstrated how it can differentiate between lessors and lessees, designing cost-effective policies. Similarly, FinTech has enabled leasing automation, eliminating the need to maintain manual records.

Modern leasing solutions have also provided an open architecture, supporting user-interface tools. It doesn’t require high-tech programming but can meet every lessor’s unique business needs. It also allows seamless lease management by simplifying complex workflows and getting multi-step approvals within minutes. Sounds interesting, no?

With that in mind, we’ve highlighted four ways FinTech is improving lease management, but before that, let’s discuss the relationship between FinTech and leasing.

FinTech & Leasing

Attractive lease agreements can turn into a costly business. That is because lessors are unable to capitalize on the lessee’s risk. It also happens due to penalty charges from the compliance board, auto-renewals, and termination fees.

Upcoming changes in the leasing standards have fueled this problem even further, making it arduous for lease providers to keep up with changing regulations.

The developments in computer technology and AI form the heart of Fintech leasing accounting management. It has introduced software programs to apply new lease accounting standards. It doesn’t matter if you follow GASB 87 or IFRS 16; the software can interpret all data accordingly.

Further, FinTech enabled the integration of Algorithms that can simplify the compliance process, taking out the legwork from the accounting process.

Some leasing applications also have an interface with ERP systems like Oracle and general ledger applications, making the process much simpler. Accountants must record journal entries; the software books all transactions in specific headers.

The flexibility and practicality offered by FinTech have made lives easier for lease providers. They can accurately complete financial statements obligatory for compliance with minimal human intervention and errors.

1.  Leasing Automation

Leasing automation software powered by FinTech can optimize and streamline the leasing process. It is a subscription-based model, automating every step in the leasing journey. Look below.

  • Lease Approval Process: The entire decision-making process is exhaustive and time-consuming due to lengthy approvals and protocols. However, the software can help automate all the forms, making the process straightforward. In addition, it will also reduce human errors, streamlining the entire process.
  • Lease Tracking: There are different stages of leasing, and keeping track of it manually is next to impossible. The software can provide a system where you can track every lease agreement. That way, you can see when it is time to renew or terminate the lease agreement. 
  • Payment Process: FinTech solutions can automate this process by integrating payment options into the accounting software.

It will check when rentals from the client are due. It can also send reminders to every client, ensuring they pay timely. Besides this, it will also penalize the customers who fail to make rental payments timely.

2.  Enhanced Customer Intelligence

As business models continue to evolve, lessee’s needs are also changing. Fortunately, FinTech can help companies understand these evolving preferences better. It comprises electronic registers of all commercial activities of a particular region.

That way, lease providers can get insights into customer behavior and buying patterns.

Furthermore, analytical tools integrated into the lease management system can predict consumer behavior and outreach activities before people begin their search.

It will allow lease providers to determine how much rental a consumer is willing to pay for specific equipment. They draft their business strategies accordingly, ensuring they don’t overcharge customers.

3.  Financial Data in Cloud

Maintaining financial data in the Cloud has become a norm in the business landscape. Entrepreneurs used to reconcile their online balance with their paper ledger for all the transactions, but now, they trust online applications.

Similarly, lease providers rely on the Cloud for storing all financial data relating to their clients. You can maintain all records on the Cloud, from their financial records to equipment details.

Leasing data stored on Cloud servers improve access to information. It doesn’t matter if you work from home or the office; the data will be readily available online.

Further, lease providers don’t have to skim through millions of files to find the record of one customer. Instead, they can type in the search bar, and all relevant data will appear on the screen.

Moreover, data management through Cloud can help with portfolio consistency. You can maintain portfolios of every client in a separate folder and measure your risk profile. The risk can be high if all your clients are in the automobile sector.

After all, the downfall of this sector can disrupt your business. Hence, focus on maintaining a diverse portfolio.

4.  Improved Credit Evaluation

Before agreeing to lease equipment, providers evaluate the lessee’s credit standing. They determine if the lessee will pay rentals timely by looking at their credit history. The evaluation process is time-consuming as different departments look into a customer’s profile before approving the lease.

Thanks to FinTech, auto-decisioning systems can perform the same task within minutes. It can collect more than 700 data points from domains such as banking records, cash flows, etc.

The system consolidates all financial information and provides it to the credit analyst. They can scrutinize the data and render a credit decision within an hour. This way, FinTech can drive massive cost reductions in the leasing industry.

It can also increase the application’s processing time, which is crucial for improving customer experience. Further, automation of credit evaluation in today’s fluctuating economy can ease the decision process, making leases accessible to everyone.

Final Thoughts

FinTech solutions are nothing less than saviors for the leasing industry. They enable lease providers to jump-start the automation process and transform the leasing process. These tech-savvy software solutions are also allowing leasing companies to modify procedures.

They can create credit algorithms to weed out risks with minimal manual intervention. Above all, FinTech can speed up the leasing process, leading to faster approvals and credit evaluations.

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