April 3, 2025 Three Back-Office Digitization Trends in Asset Finance

Bringing digital efficiencies to specialized finance operations creates a ripple effect that drives impact all the way to the end customer.

By James Powell, Head of Specialized Finance, SBS

Although digital transformation has been a priority for financial services organizations for years, tangible change doesn’t happen overnight. For many, there’s been a significant focus on strategy and planning before any work can actually begin. And even among those with digitization projects underway, many institutions have opted for a gradual approach that involves digitizing specific areas of their business on an individual basis, rather than undergoing a rip-and-replace of all of their systems and processes at once.

These initial transformation projects are typically focused on high-priority areas first — one of the reasons why there’s been a disproportionate focus on digitizing retail finance as organizations work to quickly address consumers’ growing demands for digital-first financial experiences.

While banks and financial institutions have evolved to meet these demands in their customer-facing interactions, the way that they handle specialized finance, such as inventory and equipment loans, has largely remained unchanged.

This is not because specialized finance is less of a business priority for financial institutions. Rather, the operations surrounding specialized finance are more deeply rooted in decades-old, manual back office processes that are seemingly more difficult to transform. Because these processes often take place in the back office, they’ve also been isolated from the modernization happening in consumer-facing finance processes.

As financial institutions get further along in their digitization projects, however, bringing the same digital efficiencies that they’ve introduced to their retail finance operations to inventory, equipment and other specialized finance operations is no longer as overwhelming as it may have once seemed. And, once transformed, even back office operations can create a ripple effect that drives efficiencies all the way to the end customer.

Here are just a few examples we’ve seen in our work to guide banks, financial institutions and lenders on this journey.

Reduced operational costs reduce front-end costs for the customer.

Although they require investment up front, the cost of running and managing digital infrastructures is much lower than that of legacy systems.

Digitization enables organizations to support new ways of consuming software, such as Software-as-a-Service (SaaS). Compared to running and managing software on-premise, SaaS models are managed by the software provider via the cloud. This means that instead of having entire IT teams dedicated to overseeing their software and undergoing costly and disruptive upgrades every year, organizations will receive smaller, direct software updates as often as the technology provider needs to deploy them. These updates can also be automated to take place after business hours in order to avoid system downtime, as well as eliminate the need for around-the-clock IT staffing.

Over time, cost savings such as these will not only offset initial investments in digitization, but introduce opportunities to pass those cost savings onto end customers across the loan process.

Automating inventory auditing speeds up the entire financing process.

Auditing is a critical part of the inventory and equipment financing lifecycle, enabling banks and lenders to mitigate risk by ensuring that the assets they’ve financed remain in good condition while under a retailer’s care. It’s the process of doing so that’s been one of the more resource-intensive parts of the asset loan lifecycle.

For years, lenders have had to rely on sending an auditor around to all of the businesses they work with to physically inspect the inventory they’ve financed — which can include cars, commercial vehicles, farming equipment and more. The resulting process is both time-consuming and costly, especially for lenders who need to conduct audits multiple times a year.

Now, there are digital alternatives. With AI and other modern technologies, lenders can conduct audits virtually, as often as they’d like. This not only introduces large-scale cost, time and energy savings on the lenders’ side, but with more accurate, AI-powered insights, lenders can improve the financing rates they offer to their customers. Customers also benefit from an autonomous process that is far less disruptive to their everyday operations than spending days at a time with an auditor.

Open banking enables lenders to power faster and more accurate underwriting processes.

Open banking is fundamentally transforming the ways that financial data can be shared between institutions. While the initial use cases we’ve seen have been geared primarily towards giving consumers the ability to transfer their financial information easily between banks, open banking creates significant opportunities for specialized finance as well.

During the loan underwriting process, for instance, businesses can now give a lender permission to go directly to their bank account to access the financial data they need to assess risk, rather than sending pages of transaction history and other information over manually.

Since open banking is still an emerging concept in many markets — especially those where regulations have been slower to take shape — lenders may still face some hesitancy from their customers to provide the consent needed to access their financial data. One way we’re seeing lenders navigate this is by offering customers a better loan rate if they give consent to open banking. Over time, as customers develop higher trust in open banking, it can be seamlessly embedded within credit applications so that it’s less visible and becomes a standard part of the credit underwriting process.

The resulting efficiencies speed up the overall underwriting process, which in turn speeds up lending and, ultimately, the pace at which companies can bring new inventory to market. Of course, for lenders to integrate new open banking capabilities at scale, they will first need a digital infrastructure that can support them.

By extending digitization efforts beyond consumer-facing finance to specialized finance operations, financial institutions can streamline all of these back office processes and more. Where they’ll see the greatest return on their investments in digitization, though, is in creating lasting value for both lenders and their customers.

About the Author:
James Powell is the Head of SaaS Transformation & General Manager Specialized Finance at SBS.

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