Many P&A providers offer services that require them to pay out claims — extended warranties and service contracts are huge staples of the F&I market. But while the products themselves have evolved over the years, the way providers pay claims has lagged behind; in most cases, it still requires the dealer client to submit a claim, then for the provider to approve it and mail a check, and then the dealer client has to wait for the check and cash it at their bank. In an age where technology —even banking technology — is changing rapidly, this is a system that is increasingly inefficient.
This is where Jim Pratt, vice president and general manager of global virtual payments at WEX Inc., wants to step in.
More than a decade ago, WEX pioneered its virtual account solution that currently allows providers to receive and process claims from dealers all electronically, and then deposit any payments directly into the dealer’s account, without needing to issue any paper checks or wait on mailing cycles. “A big part of the innovation is moving the system from a paper-based, manual payment to a digital payment,” Pratt said. “The market itself has been a little bit late to the move overall compared with other industries we serve such as online travel agencies; P&A still had a high volume of payments made by check, but there are a number of inefficiencies in that.”
While WEX’s virtual account technology itself isn’t new, moving into this part of the automotive industry is something WEX is still relatively new at. It had fleet and corporate clients, but it realized that going directly to providers to offer its product to them, as something to be included in the provider’s own packages to dealers, had value. Pratt doesn’t see it as just a product that gets added on top – he sees it as something integrated deeply into provider systems, working seamlessly with what they already have in place. “We spend a lot of time focusing on that as well,” he noted. “Our extremely successful integration with F&I Administration Solutions is a perfect example of this. We integrated with their SCS Auto administration solution and almost all of their VSC provider customers are now our customers, too. The integration means that payments are done with the click of a button on the claim screen and payment reconciliations are done automatically every evening. It is extremely efficient and everyone in the process benefits.”
But he recognizes that outside the partnership with F&I Admin, this is still a concept that is relatively new to the P&A arena. “I think it’s going to continue to be a challenge [integrating systems],” he noted. “The industry has fully embraced this idea that we need to move as quickly as possible to convert payments to electronic payments; what I see at conferences and read in magazines is that everyone is embracing it and moving at various paces. The challenge doing that, however, is going to be doing it well, and making sure whichever electronic provider you use is tightly integrated with repair and maintenance, accounting, and other related systems.”
He went on to note that providers need to think about not only what’s most convenient for them, and will save them money on the back end in accounting costs, but also what’s convenient for the payees — the dealers. “You might have the best system in the world, but if the payee has to make huge investment, it’s going to be a hard sell,” he said.Looking Forward
But making the transition from paper checks to electronic isn’t the only conversation Pratt believes providers need to start having. Even though the first transition is only in the beginning stages industry wide, he’s already starting to hear talk about mobile technologies and where they’ll take the payments market. “I’m already seeing a move to pay with phone,” he said. “Experience shows what we see in the consumer world quickly starts to move in to the business world. I think people need to be ready 3-5 years from now; the need to be aware of not only electronic, but they need to be thinking about digital and mobile.”
He admits that mobile payments is still in the “frontier” stage, with a lot of great ideas floating around, and money backing them, but right now, he noted, there are just too many diverse solutions. Eventually the market will most likely settle on a few standards, with the bulk of companies jumping on board at that point. “There are scores of different startups right now, but eventually that will begin to consolidate and we will have a relatively small handful. It’s a little bit like the Wild West, and we don’t know who the eventual champions will be. That’s another reason for keeping a close eye on it, but not being too quick to jump.”
Mobile payments aren’t the only changes he can see on the horizon, either. He also believes that the trend of emphasizing customer choice is going to continue to be a strong force in the P&A market in the coming years, which will also help drive the rapid pace of change he believes will happen. “There is going to continue to be an incredible emphasis on customer choice,” Pratt said. “Understanding customer needs on an individual basis, and crafting something they need, but that’s economically sustainable is going to be a challenge — we can’t make every choice a custom choice, so providers need to offer something with choice that’s cost effective. That’s something we help our customers think about.”
One thing that hasn’t changed — the need to balance cost with innovation.
“Businesses have to be scrupulous and conscious, and focused on a cost basis. No matter how much revenue and growth there is, you have to always be looking at how can I do more, be more efficient, with the same resources and not lose any quality.”
At the end of the day, however, Pratt sees change as the driving force of the industry, and those providers who stay aware of it, and who can find that balance, will be the ones who find the most success. “Make sure you’re prepared not just for change, but for the speed of change,” he said.