RFID, Smart Chips on the Horizon for Floorplan Management

Floorplan financiers may soon take a page out of retailer Walmart’s playbook, implementing radio-frequency identification tags to track inventory.

Radio-frequency identification ― RFID, for short ― is a wireless tracking system that uses radio-frequency electromagnetic fields to transfer data from tags attached to objects. Tags contain electronically stored information that can be read from several yards away.

An RFID system would simplify inventory checks for floorplan providers. “With an RFID sticker, instead of touching 450 hoods, there’s a radio frequency being transmitted,” said Jeffrey Turley, president of PNC Dealer Finance (www.pnc.com), during a technology session at the Consumer Bankers Association conference. “You could walk pretty quickly and virtually touch them.”

RFID tags are just the first step in evolving technology on the floorplan front. “The next step is having a chip in every car,” Turley said.

As soon as a vehicle is floored, a smart chip would be embedded. Floorplan providers could send out signals once or twice a day to track inventory.

Dealers could benefit from such technology, too. “It gives the dealer the ability to track where forwarded units are,” he said, citing as examples vehicles at auto shows or those in transit to malls for display. Plus, if a vehicle is off the lot during a midnight inventory check, for instance, it may indicate a theft.

High-tech inventory tracking could be used to keep tabs on battery life, too. A dealer may hold off showing a specific vehicle to a customer if the battery is low and the car won’t start.

RFID tags could cost anywhere from $0.50 to $50, depending on their usage. For dealers, though, the technology could result in discounts from insurance providers, Turley pointed out. Smart chips, on the other hand, are “a little more expensive,” he said.

Unlike Walmart, which demanded years ago that its suppliers use RFID tags, auto industry usage will boil down to dealer adoption, he added.

DATA FLOW

On the retail front, real-time access to data is critical when embracing technology, Thomas Lazenby, senior vice president at Regions Financial Corp., said during the session.

For Regions (www.regions.com), which resumed its indirect auto lending unit in 2010 after a two-year pause, migrating into technology through what it calls a Business Collaboration Platform ― a carefully planned and executed process ― is a step in the right direction.

“There are so many applications and so much you can do you [with technology], you feel like you’re in a spin cycle and can’t get out,” he said.

When first returning to the market, Regions set out to determine what technology initiatives were important to the bank. Regions wanted new dealers to know who the bank was, what it offered, and how representatives could be accessed. Additionally, making documents available in “real time” was important, Lazenby noted.

The next piece to the technology puzzle was a focus on relationship management. Lazenby’s team decided that trend reports were the most important elements. “We want to say, ‘This is your report card of where you are and where we are,’” he said, adding that the ability to see current application statuses in real-time was also very important.

“Basically, if we have any funding problems, we can use that [platform] as a customer service tool,” he said.

The final piece included promotions for product offerings. Finance directors have dozens of finance sources available to them, so developing standout offerings can be tough.

“If you come out with a new program, how do you realistically tell them what advantages you have?” Lazenby asked the room full of lenders. “It needs to be simple. More importantly, it needs to be something you can email to them. That’s what we are doing there.”

Regions is also a big fan of real-time chat and video conferencing, both of which allow the lender to speak to individual dealers at any given time. That choice has proven to be more economical than travel, he noted.

PNC Bank, meanwhile, spends a lot of time using tech tools to analyze risk-level performance. “There may be particular attributes in that instant credit performance that might make us adjust a bit in terms of whether a file is thin,” Turley said.

The bank also tracks vintage curves, approval rates, and dealer performance. “It’s very important to us,” he said, adding that liquidity and whether dealers are waiting to be funded are items to watch out for. Additionally, 30-day loss ratios and dealer 30-day delinquencies are on the radar.

Regions, too, monitors back-end transactions, evaluating its portfolio performance semiannually. “It’s really been compelling information,” Lazenby said. The goal is to “see what we’ve got outstanding, how it’s standing up, and trying to get an evaluation of risks we might have in there,” he added.

The key with technology, though, is to avoid overdoing it. Lazenby’s advice: Don’t do so much to the point that inefficiencies occur.

 ―Marcie Belles and Christina Haberstroh