European equipment

The transition to a ‘new world’ of usage-based models

In association with Leaseurope and Eurofinas


Sustainability representatives from the equipment finance industry came together at the Asset Finance Connect ESG Unconference to discuss the emerging opportunities and challenges facing the industry as we transition to net zero.

The Science Based Targets initiative (SBTi) drives ambitious climate action in the private sector by enabling organizations to set science-based emissions reduction targets.

The finance sector is key to unlocking the system-wide change needed to reach net-zero emissions. With the SBTi Finance Framework, financial institutions can set near-term science-based targets that align their investment and lending activities with the Paris Climate Agreement. With a 50% reduction in greenhouse gases required by 2030, financiers need to start focusing on new ‘greener’ financing models.

Many in the industry see that a product shift is required from ownership to servitization and usage as we move to a ‘new world’; with usage-based and ‘As-a-Service’ models seen as the ideal products to tackle environmental issues. However, the transition to these new financing models requires a “total industry mindset change” according to the unconference participants.

As-a-Service models and the circular economy

Usage and As-a-Service models are important and impactful tools to enable the circular economy, all contributing to extending the life and use of products and assets.

The exclusive authority on Product-as-a-Service solutions, Black Winch, supports organisations in turning a product-based business into an in-house and circular subscription model and moving from transferring ownership to providing usership. Black Winch helps companies to re-think business models around servitisation and circularity to help organisations stay tuned to market changes.

Black Winch’s Sophie Féret believes that the industry needs to take a “holistic view of the ESG journey” with ESG seen as “an enablement to progress to the circular economy.”

The circular economy aims to eliminate waste by reusing it in the production process of manufacturing new products and to extend the life of these products. However, its implementation will not be effortless. The As-a-Service rising model, which is defined by the sale of the use of the product rather than the product itself, can contribute to extending the life and use of many products when applied to an asset, and therefore links to the circular economy.

For the users, the usage-based model enables them to satisfy their needs without the burden of ownership and without the need to continuously make large investments. It means that the manufacturer who owns the product has the responsibility to maintain its product in as near to purchase-day condition as possible. At the end of the many life cycles, the manufacturer is responsible for the after-use step, whether it is remanufactured, recycled or reused.

For the manufacturer, there are many economical and financial advantages with a usage-based business model: recurring revenue streams, maintenance and service product bundles, increased customer loyalty, flexibility and scalability. However, the manufacturer is now passed the risk from the financiers, with a focus on performance risk.

The goal of the usage model is that the asset is to be used for the longest time possible, by a variety of clients, whilst providing the best user experience possible. Therefore, the durability of the product is crucial; a solid and dependable product will be used for a long time, whether it is by the same user or many others.

Because the manufacturer is able to reuse the raw materials and various components after the product’s main lifecycle, the natural resources consumption decreases. The environmental and social impacts that are inherent to the extraction of raw materials and the production of one asset are therefore spread across many users instead of one asset for one user. The value of the raw materials is optimised to the maximum.

The usage-based model promotes the principles of a circular economy and, since users are more and more sensitive to environmental concerns and tend to choose the most sustainable solution, the As-a-Service business model is an opportunity to seize.

With users and manufacturers increasingly being asked to provide key information on the environmental impact of activities, As-a-Service allows all the players and their asset financing banks to access and monitor key data about environmental concerns, specifically around production and usage of the assets.

Changing mindset

While the case for usage products is compelling, many participants believe that such models will take time to take hold in the industry and will require a mindset change for the whole industry – manufacturers, finance companies, customers – and, as a result, the industry will get the maximum life out of the asset.

Manufacturers will need to redesign products to be more circular and part of a pay-per-use model, while finance companies will need to better understand this new economy and restructure their finance concepts to allow pay-per-use to thrive.

Many unconference participants see the adoption of As-a-Service models as a commercial and economic challenge for the industry. The transitional change to usage-based products requires a different approach to risk, documentation, sales and marketing.

Sales forces will need to be re-educated in order to sell a totally different financial product, or new younger talent recruited who think, act and sell completely differently. A further obstacle is finding customers who are willing to take a leap of faith and change to new sustainable models.

It was highlighted during the session that whilst customers appear to want these changes to help the transition to net zero, they too need to be re-educated so that they don’t continue to opt for traditional methods that they know and are comfortable with.

To scale up these new finance models, a fresh perspective is needed, without a comparison between traditional models.

Some finance houses see pay-per-use as a massive step for financiers and a very difficult market in which to shift. However, a huge step forward will happen for usage products when larger businesses start to support the circular economy and promote the second-hand life of assets. New financing products are essential for the transition to net zero.

We are living in an era where subscriptions are infiltrating our common life e.g. streaming movie channels; it will therefore only be a matter of time before these products are commonplace in the asset finance industry.

Partnerships needed to bring together a solution

Many businesses won’t be able to reach net zero alone. Collaboration and partnerships will be a key factor of success on the road to net zero, especially when trying to adapt to new usage-based circular models.

The uncertainty surrounding emerging technology, new risks and residual value unpredictability has led many banks and financial institutions to be hesitant about these new financing models.

With traditional financing models, banks have experience with credit risk and expertise at the beginning and end of the asset’s life. However, the period in-between is the most important part of the asset’s life in the circular economy.

Finance houses therefore need to create partnerships within their ecosystems, including manufacturers, asset managers and third-party consultants, to assist with the uncertainties and new risks.

The industry needs to deepen manufacturer relationships and enter into risk sharing or buy-back agreements in order to allow proper risk-taking on new assets. Lenders need to get smart enough to assess which manufacturers have the right technology to make it past the first wave of consolidation that will inevitably occur in the coming two to three years.

Knowledge needs to expand beyond a simple financial analysis – lenders need to develop the acumen to go beyond the numbers and get comfortable with the long-term potential of start-up players in the transition.

Confidence needed in new models

Before entering the new world of usage-based products, many funders and manufacturers need to gain confidence with the transition, which can be fuelled by data from client usage and manufacturers.

Through a new emerging data set, software ratings company Twist can provide the infrastructure to help companies get comfortable with new business models. Data such as how products are shared, remanufactured, resold, is provided to investors by an API that reports live ratings on the environmental and economic impact of circular companies. This is data that, until now, has been foreign to the asset finance industry. The digital and live way of conveying the data reflects the dynamism of the new business models.

Documentation issues

A number of participants raised concern about the lack of a Hell or High-Water clause in usage-based contracts. To promote confidence in these new financing models, changes are needed in contractual documentation. However, this process could take time with slow baby steps.

Some suggested that the contracts need to be standardised to pass through law with industry collaboration essential to provide standardisation.

Concluding remarks

The transition to a ‘new world’ of usage-based models is cautiously welcomed by the asset finance industry, but time and a mindset change are needed to enable the transition to these new environmentally-friendly financing models and circular economy.

European equipment

ESG webcast review: From good intentions to effective action

In association with Leaseurope and Eurofinas


While businesses may care about the environment and have plenty of good intentions, enforcing strategies and roadmaps and putting them into action is more challenging. Some approach the transition with a quiet determination to push things through, while many simply don’t want to pay to protect the planet or see it as too difficult to action.

However, the prospect of exchanging “dirty assets” to green ones offers opportunities for the asset and equipment finance industry to potentially make profit whilst at the same time acting on caring values. Equipment finance is in the right place to support the energy transition as well as considering how to take on the added residual value and credit risk.

But how can we turn the ESG dream into a reality? Odile de Saivre, CEO of SGEF, and Sacha Balachandran, Head of Equipment Finance at HSBC are senior representatives and knowledgeable leaders from two global banking groups, where ESG is a critical part of the parent bank’s strategy. In our recent Asset Finance Connect ESG webcast, they talked to AFC’s equipment finance community leader John Rees about getting into the details to make their ESG strategies happen.

The growing impact of socially sustainable business

Social factors have gained greater attention since the Covid pandemic forced working and living practices to change, highlighting the social issues that were already there.

With social issues being brought to the forefront, Odile and Sacha highlighted the growing impact of socially sustainable business and its importance in staff management and motivation. The importance of building a socially sustainable workforce through talent acquisition and retention is critical to futureproof our businesses, according to SGEF’s de Saivre: “People are key in our business for today and for the future.”

Both Balachandran and de Saivre are passionate about the importance of recruiting, retaining and motivating staff, and making sure that company values are consistent with modern values.

As de Saivre notes, we cannot do business the way we were doing it before, with Covid shifting the boundaries between professional and personal life, along with the expectations of people of all ages. Business is changing, assets being financed are changing, and there is an acceleration in striving for a positive impact for the planet. In these changing times, de Saivre believes that businesses need expertise and mindset: “people who can think out of the box and are motivated to go to work; they can be the future leaders of the business.”

For Balachandran, ESG is vital in recruiting and retaining staff, along with the alignment of a company’s purpose and values: “Existing and new employees want to align their personal values with a company’s values and purpose, and see the impact they can have both personally and in their workspace.”

Great companies need to follow up on the claims they make to prospective employees on their alignment with sustainability and D&I objectives, with positive action to ensure that is what new employees actually experience when they start work. According to HSBC’s Balachandran: “Sustainability is about being relevant, reliable, resilient and responsible, and that touches not just the environmental piece, but diversity and inclusion as well. If you’re not addressing those points, then you should question how sustainable you actually are and what that means for an individual wanting to join your organisation.”

A company’s culture is of the utmost important, according to de Saivre, with SGEF’s Care and Dare strategy putting ESG at the centre of SGEF’s vision. The Care and Dare motto focuses on the future and the planet and goes beyond ESG. ‘Care’ highlights the need for “true alignment” with employees’ values and the impact these values can have.

To ‘dare’ is to push the boundaries, linking to entrepreneurial innovation that is needed in the industry. Whilst guidelines are needed, innovation and experimentation are essential to confront new ways of looking at things. The industry needs to dare and take risks, but this can be difficult to implement in a larger organisation due to understanding and accepting new risk factors. Individuals need to be allowed to experiment and take “new” risk in order to feed innovation and new transactions, according to de Saivre who commented that, “if you want to move forward, you have to dare.”

As part of HSBC’s leadership team, Sacha Balachandran promotes the encouragement of employees, giving them the space to be entrepreneurs (both internally and externally). As well as challenges, there are also benefits to working for a big banking organisation: you can attract diverse talent across the group (from different markets, jurisdictions, experiences) and can leverage the brand. This helps to build diversity of thought, experience and skills, which in turn has the ability to challenge the status quo.

Circular economy

In the Circular Economy Action Plan of March 11, 2020, the European Commission highlighted the move away from the prevailing “take-make-use-dispose” model of the linear economy into a circular economy to keep the resources used in the economy for as long as possible. Resources should be used efficiently, with every phase in a products’ lifecycle being designed to ensure the product, and its individual components, are used to their maximum potential.

Many asset and equipment finance companies have been promoting the transition to a circular economy for a number of years, focusing on refurbishing and recycling their assets and components to ensure that assets are used throughout their lifecycle and recycled accordingly.

The leasing industry is circular in its very nature since the primary goal of companies active in the sector is to ensure that the assets remain in good working condition for as long as possible. Leasing can actively promote a circular economy by encouraging customers towards use as opposed to asset purchase. This massively reduces the amount of wasted resources since customers no longer dispose of assets once they have finished using them. Instead, customers simply return the asset to the leasing or rental company, who are well placed to either re-lease the asset to another customer, re-sell the asset, refurbish it for a second/third life cycle, or (where appropriate) dispose of or recycle the asset safely.

Balachandran noted that HSBC Equipment Finance works with partners to support circularity in terms of reuse, refurbish, redistribution and resale of assets as they come to the end of their first life. While some assets can go beyond their normal maturity and are naturally easier to reuse, refurbish and remarket, for example, buses and construction equipment, there can be a challenge to fund the second and third life of some assets. You need to be very knowledgeable as an asset financier with the asset and its use, and how to extend the life of the asset.

SGEF and its vendor partners see that assets can be used after their first life and are willing to make sure that the secondary market is ready and under control in order to help to refurbish and remarket these assets. Developing a reselling strategy for reused assets presents a number of new opportunities. Many manufacturers are developing spare parts and refurbishing assets as it is becoming increasingly important to them and their ESG strategy. SGEF is becoming increasingly comfortable to finance the second or third life of assets.

Usage-based pricing models are being introduced across the industry as a more beneficial financing option for the environment. While HSBC supports businesses who have adopted the pay-per-use model, they have not actually used the model for funding themselves. However, Balachandran believes that there is a place for usage-based and subscription models from a portfolio approach.

SGEF are increasingly seeing ‘as-a-service’ models, particularly equipment and energy ‘as-a-service’, with SGEF financing some of these transactions. These are new offers and understanding the risk factors associated with such products are key to the product development.

Transition to greener assets

As we transition to new greener assets, we must find the right ‘balance,’ according to Balachandran. Balance cannot be understated and is very important as customers, clients and assets are all at different stages of their journey and therefore no one-size-fits-all approach will work. There must be alignment.

The move to greener assets presents a big dilemma for the equipment finance industry. On the one hand, green assets are good for the planet, but on the other hand these green assets are frequently more costly and potentially present a greater risk with differing or uncertain residual values.

To prevent customers doing a U-turn reverting to older assets and technology, many industry players feel that governments must step in to help the transition to greener assets. There needs to be wider collaboration with governments in terms of incentives, funding and risk sharing. De Saivre points to a “collective movement” of governments, manufacturers and financiers to help with this transition and enable the industry to move further forward.

Partnerships in the ecosystem

Both Odile de Saivre and Sacha Balachandran believe that collaborations are critical to ESG strategies and building ecosystems is extremely important.

“Partnerships are very important for ESG strategies,” according to HSBC’s Sacha Balachandran, “the reality is that you can’t do it alone.” While some partnerships are informal (education, upskilling), others are more formal (RV risk sharing).

During the webcast, SGEF’s Odile de Saivre noted that a new combination of expertise and techniques is needed to achieve a successful ESG strategy. Ecosystems will grow and develop, but businesses must be open to partnerships with new start-ups who are more agile and risk averse and can help to move businesses and their strategies forward.

Concluding remarks

Throughout the AFC ESG webcast, Odile de Saivre and Sacha Balachandran discussed how the equipment finance industry cares and how it plans to deliver on caring for the planet and its people.

We need to be brave to dare in this industry, but we also need to deploy some of that entrepreneurial innovation that is exhibited in the asset and equipment finance industry to succeed with ESG.

Find out how a new combination of expertise and partnerships is needed to achieve a successful ESG strategy by reading the review of our Asset Finance Connect Webcast

Analysis from John Rees head of Asset Finance Connect equipment finance community

It is very clear that ESG is a critical topic for these industry leading asset finance companies.

This starts with a need to ensure that the company’s goals and purpose are aligned to the private values of employees. The need to maintain, recruit and motivate staff was a key topic for both Odile and Sacha.

And then once the staff are in place the delivery on the ESG strategy is critical. It is important to have an ESG strategy but even more important to deliver on that strategy. Talk is cheap – action is critical. It was clear from talking with SGEF and HSBC that the asset finance industry is uniquely placed to support the energy transition and support the circular economy, but it is also very clear that both companies are on the start of a journey and on a learning curve.

It may take some more time but there was a clear determination from both Odile from SGEF and Sacha from HSBC that this was a critical journey. And a journey that banks may not be able to find all the solutions to but in partnership with third parties (be they manufacturers or fintechs) a journey that ultimately is critical to the future of the industry and the planet.

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European equipment

Managing utilization risk: how companies are managing the risk of usage in pay-per-use models


There was a lot of positivity at the Asset Finance Connect December 2022 conference surrounding pay-per-use models in auto and equipment finance industries.

The pay-per-use model is a much-discussed business model that businesses and consumers are considering due to its flexibility and sustainable credentials. The flexible consumption business model ticks lots of boxes – affordable for the customer, a sustainable solution, and the next step forward in future financing options.

Under the pay-per-use model, the ownership and responsibility of the product or service lie with the provider, and the customer pays a fee for usage. Many customers are considering this model because they like the idea of paying only for the services they require and use. In many cases, they also end up receiving better service because the manufacturer has a greater interest in providing a product that lasts.

While pay-per-use is not a new solution (cost per copy has been available in the copier/printer sector for many years), the rise of IoT has made the usage monitoring of the products easier, more accessible and more accurate than ever. This new data flow has made pay-per-use a more viable option for industries that previously didn’t have the tech capabilities to gain value from it.

In order to successfully leverage the benefits of the pay-per-use business model, you need to have access to two critical pillars: technology and data. Moving to a pay-per-use business model may call for changes to business capabilities, operating models, and enabling technology platforms.

There are many advantages and environmental benefits of the pay-per-use financing model with the potential to address the challenge of underutilisation of expensive machinery during the energy crisis. With many machine operators considering a switch to pay-per-use, the potential for greater flexibility and benefits for both manufacturers and operators are significant.

Pay-per-use and ESG

Pay-per-use models are a driver for sustainable consumption and the circular economy, where the asset can be reused, ensuring that the asset is serviced and as new for further lifecycle usage. As part of the energy transition, many businesses want to replace old unsustainable machines with new or used equipment supplied via a cost-effective flexible finance model.

“Pay-per-use models are a driver for sustainable consumption and the circular economy.”

Pay-per-use business models are often linked to increased environmental performance, with consumers becoming more conscious about consumption patterns and companies taking responsibility for product lifecycle issues.

In the Asset Finance Europe 50 Report 2022, Black Winch’s Yann Toutant observes that, “In response to the environmental challenges that we are facing, there are strong solutions that make us thrive while simultaneously not endangering the future generations and existing business models. The As-a-Service model is an important and impactful tool to enable the circular economy. On top of providing economical and financial benefits to the manufacturer/integrator to consolidate its position in its market or even increase it, this model reduces the environmental and social impact of industrial extraction and production of assets when associated with the circular economy principles. And since users are more and more sensitive to environmental concerns and tend to choose the most sustainable solution, the As-a-Service business model is therefore an opportunity to seize. And one last thing, for both the users and the manufacture/integrators, since it is increasingly required to provide key information on the environmental impact of our activities, As-a-Service allows all the players and their asset financing banks to access and monitor key data about environmental concerns, specifically around production and usage of the assets.”

Case study: machine manufacturer

Heidelberg Druckmaschinen AG, the world’s largest manufacturer of sheet-fed printing presses, has offered pay-per-use transactions with its printing equipment since 2017.

Heidelberg initially pioneered the new business model when they discussed changing to an Equipment-as-a-Service model (EaaS), adding the service option to the equipment. Heidelberg customers increasingly wanted support on how they could increase the efficiency of their machines. By adding a package where the price per sheet to be charged includes all the equipment, all consumables required such as printing plates, inks, coatings, washup solutions, a comprehensive range of services geared to availability, and consulting services intended to boost performance, Heidelberg was effectively allowing the customer and the machine to become more productive and efficient.

Heidelberg’s Head of Financial Services, Ralf Steger, addressed the conference session about the benefits of pay-per-use for Heidelberg’s customers, with their new digital business model following the growing pay-per-use trend in mechanical engineering, aiming to move away from growth based solely on selling and installing printing capacity.

At Heidelberg, pay-per-use offers a flexible model where the customer is only charged for the number of sheets they actually print. The model must include a base fee (related to cost of production and consumption of consumables and number of prints) which the customer must pay, but this can be flexible.

The first Heidelberg pay-per-use deal was signed in December 2017 and that first customer has now signed their fourth contract. With their pay-per-use model, Heidelberg experienced an immense learning curve, and today they have signed around 35 subscription contracts. As Ralf Steger noted, “The wise man does” and Heidelberg did!

Heidelberg has been exploring pay-per-use models for several years, looking for partners to share the risk. As an established German manufacturing and leasing company, Heidelberg knows their customers from immense data from over 20 years; they can therefore easily assess the customer risk and equipment residual value risk.

However, out of these 35 signed pay-per-use contracts, only a few have been financed externally, with most held on their books waiting for external finance partners to fund. As Steger notes, Heidelberg will take part of the risk, but they have a cashflow issue to fund the build of the printing press machinery, each costing €3-5 million. They therefore needed a finance partner to manage this cashflow.

Since the conference session, the Heidelberg Group has been able to further develop their pay-per-use model by entering into a strategic partnership with Munich Re Group. With this cross-industry partnership, the two companies are pooling their strengths: Munich Re, as the new contract partner, takes over the financing of the machinery, while Heidelberg is delivering everything which is needed for running a printing business.

Case study: pay-per-use financing

linx4 is an Austrian-based European financing company offering true pay-per-use financing for industrial equipment.

The pay-per-use financing of linx4 is based on an industrial IoT and AI risk management solution, to enable usage-risk sharing. Operating in over 20 European countries, linx4 offers data-driven pay-per-use financing products and tools to revolutionise machine financing operations using data-driven financing products and algorithms.

With a big appetite for pay-per-use financing solutions, linx4 has seen strong demand with business growing fast across different industries and different regions.

linx4’s Managing Director, Peter Oser, also sees the pay-per-use financing model as providing a sustainable solution, with the current energy transition creating a lot of demand from customers who want to replace energy-inefficient machines. If the customers do not have the balance sheet or traditional financing options to buy new machines, they therefore want variable, flexible financing based on a cashflow base.

linx4 enter into vendor partnerships, with 100% of business conducted through machine manufacturers who want to move to an EaaS model. Oser believes that many manufacturers see pay-per-use as presenting a real opportunity to have a more intense customer relationship. Often it is very difficult to get data from a client according to Oser, but if the vendor provides pay-per-use financing through linx4 they can access the data, have long-term service contracts and use the data to build additional business models, all while enhancing and digitalising the customer relationship.

“Pay-per-use is an enabler for vendor partners to develop new business models.”


With the pay-per-use model, it can sometimes be difficult to predict individual case utilization according to linx4’s Peter Oser, so transactions can be observed on a portfolio basis to spread the risk of utilisation.

Oser highlights two things that are essential for pay-per-use financing that traditional finance companies are struggling with:

  • Technology – The ability to connect the equipment to your lease administration systems once the transactions start, so that you can collect data through a secure data transfer from the machine to your system. Middle and back-office functionality are needed for invoicing and other administrative processes. As Oser points out, this is easier to set up as a new start-up company rather than a company with legacy systems. With the rise of IoT, tracking the usage of products has become easier, more accessible and more accurate than ever.
  • Data – To understand the future volatility of the usage of the equipment, you need to look at different sources of data – from vendors/machine manufacturers and individual customers. Based on the data, the risk can be assessed, and the risk margin determined for each individual deal and priced accordingly.

To look at utilization on a portfolio basis, a diversified portfolio with usage risk focusing on more than one industry and region is essential to build an understanding of different utilization.

Oser notes that it is not unusual to look at a new type of risk along with the data behind it and the evidence you have. You can also look at ratings agencies and then pricing can change as you grow more confident.

With this model, a possible partnership approach between pay-per-use financiers (who have the technology/connectivity to the machine and understanding of machine usage risk) and more conservative bank lenders (who have funding and expertise in underwriting credit risk) can create complimentary relationships.

In the current climate, Oser points out that there are many investors in the European private debt market which has grown massively after moving away from banks. As money has moved into these areas, spreads have tightened, and a lot of capital is available. The pay-per-use business model with its risk returns and margins are attractive to the private debt market because pay-per-use financing offers real value to the customers and so they are prepared to pay a premium relative to traditional financing.

Case study: Technology

Basikon offers a cloud native technological solution that manages the full lifecycle of assets financed under pay-per-use transactions. As Renaud Winand, Country Manager for Benelux and Nordics for Basikon points out, digitalisation is needed from the front to back-end of the pay-per-use transaction.

Winand highlights the significance of products that are used part-time and the use of ‘used’ not new assets. Refurbishing and reusing the assets links to a sustainable circular economy. This also provides access to assets for smaller companies who want limited use of equipment, whilst also extending the life of the assets.

Basikon’s Winand believes that there are three fundamental characteristics needed to conduct pay-per-use financing:

1. Help the client to identify what they need, and the relevant pricing.
2. Measure usage of the asset (adding IoT devices to machines) and invoice that use.
3. A flexible digital system that can reconfigure traditional solutions.


For pay-per-use to be embraced by the business world, there needs to be a change in the industry’s mindset, according to the session panelists.

Asset Finance Connect’s John Rees believes that, historically, we are a client financing business and there is an asset. But with a pay-per-use full-service model we need to become an asset financing business with multiple clients for the one asset; if you fully understand the asset, you can change the clients.

Basikon’s Winand agrees, you no longer need to understand the risk of the client, but you need to understand the asset, with a shift from risk managers to asset risk managers.

The focus is no longer on interest rates and traditional bank loans either; it is now about the usage of the equipment and assessing the utilization risk. With the correct data and technology, this risk can be managed.

“For pay-per-use to be embraced by the business world, there needs to be a change in the industry’s mindset.”

With big demand for pay-per-use going forward, this rising business model must be seen as a future financing solution for both auto and equipment industries that can offer flexibility and environmental benefits.

Find out how companies are managing the risk of usage in pay-per-use models by reading our summary of December's Asset Finance Connect Conference Session

Analysis from John Rees head of Asset Finance Connect equipment finance community

The conversation about pay-per-use models continues to dominate discussions at industry conferences including the recent AFC conference in London in December 2022. Whilst there is a strong feeling that the real number of pay-per-use transactions that are currently delivered is relatively small (compared to more conventional finance products), there is an even stronger feeling from leading industry executives that, firstly, this discussion is critical and, secondly, that in the coming 5 to 10 years pay-per-use products will become more and more important.

It is easy to see why there is such a strong feeling that this is a significant product for the future for the asset finance industry. The pay-per-use product charges the user of the machine on outcomes rather than being a fixed periodic charge based on capital and interest repayment. It means that the machine is only paid for when it is being used. This brings significant efficiency for the user and contributes to a much more efficient lifecycle for the machine, allowing for a potential second life for the machine. All-in-all a product that greatly supports the financial efficacy of the user and contributes greatly to the circular economy.

The product is in its early stages of development, but its relevance will surely grow and grow. As usual the early adopters pave the way for the industry. The asset finance industry needs to learn how to sell the product as there are different risks associated with the model, but the industry learns and adapts quickly.

How soon before the industry refers to provider and user as opposed to lender and borrower? Not long, I suspect!

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European equipment

AFC leaders’ interview with Carlo van Kemenade, CEO of DLL

In association with Leaseurope and Eurofinas


Carlo van Kemenade, CEO of DLL, spoke to Asset Finance Connect’s equipment finance community leader John Rees in the latest AFC leadership interview, in association with Leaseurope and Eurofinas.

Carlo van Kemenade leads the world’s largest asset finance and vendor finance provider. Taking up his leadership responsibility in February 2022, Carlo has recently completed a tour of the DLL global network to bring his vision and refreshed strategy to DLL. So, what is it like to manage a global vendor finance company which is a 100% subsidiary of Rabobank, a Dutch cooperative bank?

Future vision for DLL

After being appointed as CEO and Chairman of the Executive Board of DLL in February 2022, Carlo van Kemenade is responsible for implementing the company’s strategic plans, which enable DLL to deliver integrated financial solutions to manufacturers and distribution partners in more than 25 countries around the world.

Van Kemenade joined DLL from Obvion, one of the largest mortgage providers in the Netherlands and a wholly-owned subsidiary of Rabobank, where he held the position of CEO and Chairman of the Board between 2018 and 2022. Prior to his time with Obvion, Van Kemenade had a career with DLL that spanned more than 25 years, where he progressed through the ranks and built leadership experience in finance, operations, risk, IT, sales and general management, including assignments in several European countries and the United States. In 2013, he was appointed Chief Operating Officer and Member of the Executive Board of DLL and was responsible for all country operations and IT activities across DLL’s entire global network.

During his first year back at DLL in 2022, Van Kemenade spent time travelling throughout DLL’s global network reconnecting with DLL’s 5,500 employees in over 25 countries. The reunions with colleagues but also with customers were a fantastic experience for Van Kemenade. The reconnection was a big success as a following engagement survey amongst the 5,500 showed an extremely high score that outpaced the market, showing that loyalty and engagement is ever present in DLL’s network and making Van Kemenade extremely proud.

DLL has a strong management organisation. Currently composing and expanding the Executive Board team, Van Kemenade sees his ‘Team EB’ as “collectively responsible for the total strategy, while speaking with one voice”.

Van Kemenade sees DLL as united with a strong foundation, hands-on, and good at executing and delivering strategies due to:

  • Consistent service across DLL’s global network
  • A people strategy, where all employees can get the best out of themselves every day. Execution power and teamwork is part of the cultural experience at DLL.
  • Discipline in planning processes – DLL’s refreshed strategy has roadmaps with timelines, initiatives, ownership. Roadmaps are clear and realistic, with progress monitored. Roadmaps have critical paths to see when things are delayed and might affect other roadmaps.

Rather than looking at geographical expansion at the current time, DLL are focusing on sustainability, digitalisation and DLL’s unique culture, whilst optimising and expanding their value propositions for their vendors, dealers and customers.

The core business model of DLL

“We strive for deep partnerships with deep mutual understanding not just for one another’s industries and business models, but we also want to be a cultural fit for our partners as well,” commented DLL’s Carlo van Kemenade.

Delivering a consistent experience for its vendor partners across all global markets in which it operates, DLL represents its partners’ business and understands the customer experience.

DLL’s commercial performance, and partner and customer satisfaction are constantly monitored and measured, with DLL’s Net Promoter Score exceeding the market and improving for a fourth consecutive year to +62 (2021: +53).


DLL has a new and refreshed strategy which is accelerating their digital transformation. Van Kemenade sees digitalisation starting at the point of sale and connecting with customers, partners and dealers with DLL systems and databases to enable the most flexible customer journey possible.

DLL wants the customer journey to be 100% digitalised and customer friendly. With Covid accelerating the digitalisation journey, DLL have more than doubled their investment and resources in accelerating the strategic digital journey over the next three years.

Bank-owned benefits

Van Kemenade highlighted the benefits of having Rabobank as its parent company including the stability during a financial crisis to always provide 100% continuity in funding to its partners and customers. As well as sharing knowledge and expertise with each other, particularly relating the food and agricultural business, Rabobank and DLL also share people talent (like Carlo van Kemenade himself) as the bank can offer career advancement in different ways.

Significantly, DLL has recently become one of the three key strategic pillars of Rabobank, who see DLL as a co-facilitator for the ESG journey (climate and energy transition as well as food transition, many of which are applicable to DLL’s new strategy). As Van Kemenade notes, “the bank views DLL as the facilitator and the lead player in asset-based finance products”.

ESG and sustainability

The Energy Transition Team was set up at DLL to manage its sustainability goals across all sectors and divisions. DLL see the ‘Road to Paris’ as their highest priority, helping to facilitate the transition to net zero. From a sustainability perspective, DLL’s redefined purpose is to help improve the world, combining with their partners to create a better world. This also provides new commercial opportunities for DLL and their partners.

Most of DLL’s partners are also on the ‘Road to Paris’ and they expect DLL to be on the same journey. Some partners want to be guided by DLL and some will go at a faster pace than DLL, according to Van Kemenade. This is most evident in the construction, transportation and logistics/industry (30% of portfolio) business, and in the food and agricultural business (40% of portfolio), so effectively 70% of DLL’s portfolio and their partners are busy on the ‘Road to Paris’.

DLL aligns and strategizes with their partners whilst looking at commercial opportunities with them; for example, clean technology from a climate perspective but also looking at greener assets that help the transition – finding the right balance in the journey to Net Zero. DLL are also currently developing an e-mobility strategy.

Organisationally, DLL are addressing the energy transition by establishing an energy transition team in the commercial domain. The team will support NGOs to capture commercial opportunities by following developments and translating them into commercial plans to approach the players and networks where these opportunities can be found.

Pay-per-Use financing is a topic at the forefront of DLL’s thinking. As a frontrunner in the Pay-per-Use concept, DLL have been able to apply it successfully to the marketplace and, whilst current demand is low, Van Kemenade sees huge potential over the next decade.

Carlo van Kemenade believes that the industry must be patient with new sustainable financing models, with the ‘Road to Paris’ justifying any investments and creating payback.

Pay-per-Use is the future, according to Van Kemenade, as he believes that over the next few years almost everything we do will be focused on circularity, with Pay-per-Use being an important part of it.

Van Kemenade sees ESG as a critical part of the DLL recruitment process. Younger talent care for purpose and want to work for a purposeful company who positively contribute to ESG and DLL gives all members an opportunity to contribute.

Carlo van Kemenade spoke passionately and honestly about his own career journey at Rabobank and DLL and how that positive rewarding experience has helped him see the importance of talent recognition and development in the asset finance business: “Healthy growth combined with healthy opportunities combined with a very well thought through people strategy where there is sufficient money available to invest in talent.”

Purpose is important because people want to work for a company which doesn’t just prioritise profit but has a clear focus on planet and people. Van Kemenade believes that DLL have an obligation to look after the planet as well as the next generation of talent.

Van Kemenade believes that there is a need for both new and mature experienced talent: “In the war for talent you have to cherish several generations.” Members who stay at DLL need to be kept fit, happy and healthy for longer, which requires extra investment. Van Kemenade discussed bringing back retired members to DLL to share their experiences with younger talent.

Find out from Carlo van Kemenade what it is like to manage a global vendor finance company by reading the review of our Asset Finance Connect Webcast

Analysis from John Rees head of Asset Finance Connect equipment finance community

It was a great pleasure to interview Carlo van Kemenade – CEO of DLL. What did we learn?

DLL remains the world’s leading vendor finance provider, delivering very high levels of satisfaction to its partners and their customers.

DLL appears to get the mix between centralised control and local variation right. Providing a consistent experience which makes sense both in a local market and to global manufacturers is a challenge for most global vendor finance providers and DLL manages this challenge well. They get the right balance between global and local.

The organisation sees the ‘Road to Paris’ as an enormous opportunity – as does Rabobank, its parent bank. DLL is well positioned to capitalise on the Net Zero transition.

Whilst DLL currently does not see a great demand for complex Pay-per-Use deals, Van Kemenade expects that in 8-10 years almost every solution will be related to circularity and innovation, with Pay-per-Use being a key part of it.

Van Kemenade sees the importance of the link between prioritising purpose and attracting the next generation of talent. DLL attracts very high-quality staff and van Kemenade clearly intends to prioritise further developing its workforce.

Perhaps the biggest challenge for the business comes not from within but from the banking regulators. As a bank-owned finance provider, DLL will have access to competitively priced capital, but it could also be more constrained by regulation.

As a lifer at DLL, Van Kemenade really understands the business he now runs. He is a safe pair of hands. His accession at DLL has been managed with great skill with a formidable and talented team assembled around him. He has gently massaged the business’ strategy to include more focus on ESG. There has been an increased focus on people – an asset which Van Kemenade clearly sees as vital for the business’ future prosperity. It is difficult not to conclude that the company remains in good health and in good hands.

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European automotive
European equipment

How digital business ecosystems are changing the auto and equipment sectors

The concept of ecosystems originated in the geographical world but has traversed to the business and technological environment. As John Murray, Head of Solution Architecture (EMEA) at Alfa confirmed at the recent AFC Winter Conference, “Ecosystems are an environment with a set of rules and a number of participants who collaborate and compete against each other, where ultimately the overall value of the ecosystem is greater than the sum of its parts.”

Over time and following the pandemic, customers have become increasingly competitive and more demanding over what they expect to see in the marketplace, e.g. self-service applications, 24-7 availability as key requirements. Ecosystems answer these customer demands, with strong software providers offering a variety of components that are put together on a single platform which can be flexible, innovative and can adapt to requirements.

Building a digital ecosystem for asset finance is explored in Alfa’s Digital Directions 3 report, which draws on industry experts’ input to understand a future in which technology’s power is channelled not by individual operators, but by many participants, who collaborate in an ecosystem on delivering new value that exceeds the sum of its parts.

“Ecosystems are an environment with a set of rules and a number of participants who collaborate and compete against each other.”


Application programming interfaces or APIs are crucial to today’s digital economy as they are the foundation of many digital platforms, enabling organisations to build and plug-in new products and solutions in their ecosystems.

Digital Directions 3 emphasises the importance of open APIs as “a cornerstone of modern technology” in the way they simplify the process of connecting applications and enable ordered interaction between them.

For example, Alfa can provide APIs, such as to their credit decisioning engine, and clients can connect to these APIs with their own front-end portal. APIs together create an ecosystem that is incredibly powerful.

John Murray noted how Alfa can create direct links via open APIs to specialist products and services which will enrich their customers’ experience, reduce the need for Alfa to develop every element required in-house, and provide access to innovative fintech solutions.

“The system orchestrator plays a key role in making ecosystems deliver what is intended.”

Role of the orchestrator

The orchestration layer of the digital platform brings together all APIs and components, and is one of the most important aspects of the ecosystem for the customer journey.

As highlighted in Alfa’s Digital Directions 3 report, “The system orchestrator plays a key role in making ecosystems deliver what is intended. They are trusted advisors to their customers, charged with handling the complex data sharing, technology selection and value metrics involved in building an ecosystem. They have an overall picture of all the participants in the network, and an understanding of what new functionality is required, who will supply that requirement, and how risk and reward will be shared.”

An orchestrator could take on an advisory and consultancy role focusing on the customer and what is best for them, looking at what could be added to the platform, and then orchestrate what is the correct and best tool for the job.

With industry expertise and customer experience, a company such as Alfa would be ideally placed as an orchestrator bringing its trusted leadership to the ecosystem, forging successful partnerships, and integrating components to make a successful ecosystem. With Alfa’s industry knowledge, John Murray highlights that they can look at what is already available and put the solutions and products together effectively in a business relationship.

John confirms that as an ecosystem orchestrator, “the key thing is to understand the business benefits alongside the technical options that are available.”

Boston Consulting Group notes that, “Orchestrators are the pivotal players and stand to gain significantly as platform-based ecosystems increase market share and eat into the profits of traditional companies.”

“The key thing is to understand the business benefits alongside the technical options that are available.”

Collaborative partners

Whilst not a new business concept, ecosystems are essentially about choosing the right solutions and products and plugging them into a single platform for a seamless customer journey.

Ecosystems therefore need strong collaborations with partners who have a single focus and can deliver the functionality in a solid way. As John Murray points out, Alfa could build each individual function but this could be time consuming, or they could partner with a trusted company with a good reputation who can provide that functionality quickly. Alfa would help choose the best solution with the most flexibility that could add the most value to the ecosystem, while not necessarily doing much – if any – development work itself.

The key benefits when creating partnerships and ecosystems are twofold: (i) speed and improving time to market, so that customers get the solutions quickly; and (ii) reducing risk.

Ecosystem partnership strategies can generate significant value both by growing the core business and by expanding the portfolio into new products and services.

One such integration partnership with Alfa is Tomorrow’s Journey, whose SaaS platform JRNY is purpose-built for subscription and usage-based mobility, and integrates perfectly with the Alfa Systems platform. Tomorrow’s Journey CEO Chris Kirby said, “the customer’s desire for an enhanced digitalisation to plug gaps in their journeys resulted in a necessity to partner with other specialist brands and provide a seamless customer journey.”

But with so many solutions in an ecosystem, which players – large or small – actually benefit from the partnership? Andrew Martin, Chief Data Officer at CrediCar would like to think that everyone can benefit, with large companies, like Alfa, having the flexibility to plug in new technologies and leverage advancements that they can’t or don’t have time to build in-house, while smaller companies can focus on new solutions and technologies and then interface with big players who can plug in their packaged-up solution to the ecosystem.

There are also advantages for business customers who get the benefit of all these varying solutions and products being brought to them on one platform in a seamless journey.

“Ecosystem partnership strategies can generate significant value both by growing the core business and by expanding the portfolio into new products and services.”

Partnership risk

Digital business ecosystems present a number of potential pitfalls as well as opportunities. Working with smaller fintechs, who often need to generate new funding, can be seen as a risk for bigger players in case they suddenly disappear and there is a gap in the platform.

John Murray highlights that companies such as Alfa will ensure that they only collaborate with trusted partners with a successful track record, to ensure that their customer won’t be affected, with any risk being looked at from a business sense (a need to mitigate risk through procurement and due diligence of new partners) and a technological one (cloud offerings have resiliency built in which provides strong backing).

There is also an element of risk for smaller companies who partner with large companies in the ecosystem, as a large player could decide to build the third-party functionality themselves or replace it with a better solution. The use of APIs in a software platform built of many components allows the easy replacement of an individual component when a better one becomes available, making it easier and faster for platforms to evolve and develop.

Alfa’s John Murray points out that major companies like Alfa prefer to focus on the customer and customer journey when providing them with the partner’s functionality. They like to interact with smaller specialised companies as the more ecosystems they can be part of, the stronger the overall solution will be. If they were to create each solution internally, the time to market would be too long so it makes sense to partner with specialists.

Large tech companies no longer have to be seen as a one-stop-shop, and they present the opportunity to plug-in specialised flexible solutions which help to adapt to new customer requirements. In turn, small companies can be integrated to many different ecosystems creating a stronger offering.

Another risk could be identified when smaller companies move between the ecosystems of more than one big player. However, John Murray confirmed that Alfa is happy for their partners to be part of many ecosystems as it makes them stronger. The downside to being exclusive to one ecosystem is that you can only move as fast as that one system, so working with a large number of players allows the smaller company to be functionally stronger and have a wider awareness with new visions from different markets.

“Large tech companies are no longer seen as a one-stop-shop; they present the opportunity to plug-in specialised flexible solutions which help to adapt to new customer requirements.”

For more information on building digital ecosystems in asset finance, download Alfa’s Digital Directions 3 report, which offers insight into the emerging role of technology providers as ecosystems orchestrators, identify various types of ecosystems, and discuss the current opportunities to deploy them in order to meet the needs of the auto and equipment finance industry.

Find out how digital business ecosystems are changing the auto and equipment sectors by watching our Asset Finance Connect Conference Session

Analysis from Andrew Flegg CTO, Alfa Systems

One of the key goals for many of today’s customers and providers is to embed all technology using APIs in a wider digital ecosystem.

Open APIs are a cornerstone of modern technology which simplify the process of connecting applications, and enable ordered interaction between them. Granular, well designed APIs empower organisations to build ever-greater value for their users in less time, and with less investment, than has been possible in the past.

A digital business ecosystem provides cutting-edge capabilities and can be developed by the provider, its clients, or specialist third parties that deliver anything, from state-of-the-art digital engagement channels to innovative, usage-based products.

Finance providers are recognising the opportunities to create new forms of value through partnerships, and collaborating via shared data such as telematics, causing ecosystems to become increasingly popular.

As more participants collaborate, they begin to create a community with a common purpose, which can work together to tackle challenges. Further to this, entire platforms and applications can be fully integrated to deliver new business solutions.

The vision for an open digital platform such as Alfa Systems is to empower customers to leverage the power of these connected ecosystems, which could be through receiving telematics or credit data, or introducing new products or origination channels.

Growing economic pressures, combined with the prospect of businesses facing increased strain on budgets and investments, represent an argument for collaborating with other providers and forming partnerships. These alliances can offer the customer a complete, seamless journey in one ecosystem of specialist modules.

Alfa is therefore exploring more integration partnerships, to satisfy the future needs of the industry, while opening up possibilities for our customers and showing them what is available in our growing ecosystem. Through such collaboration, Alfa can introduce customers to specialist ‘out-of-the-box’ applications in a central ecosystem, providing a managed solution that will save them from having to embark on that journey themselves.

Entitled Building a digital ecosystem for asset finance, Alfa’s Digital Directions 3 Report draws on industry experts’ input to understand a future in which technology’s power is channelled not by individual operators, but by many participants, who collaborate on delivering new value that exceeds the sum of its parts.

In the report, Alfa offers insight into the emerging role of technology providers as ecosystem orchestrators, identifies various types of ecosystems, and discusses the current opportunities to deploy them in order to meet the needs of the auto and equipment finance industry.

Download the Digital Directions 3 Report

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European equipment

Detected: Frictionless global business onboarding

AFC Autumn 2022 Conference: Fintech Innovator Award

Winner: Detected

The Fintech Innovator Award Winner for Autumn 2022, sponsored by Lendscape, was unanimously voted for by the Fintech Innovator judges and AFC conference delegates. The winner for Autumn 2022 was Detected.

Liam Chennells, Chief Executive Officer and Co-founder of Detected took to the stage at the AFC Autumn 2022 conference to pitch Detected to the Fintech Innovator judges and conference delegates.

Detected, which was founded in July 2020, is a London-based fintech that provides frictionless global business onboarding, the key to driving profitable customer relationships.

Detected believes that, up to now, business onboarding has been slow, complex, manual and unfit for purpose and that current Know Your Business (KYB) verification is ineffective for both the businesses who are doing the onboarding who have to connect with multiple data providers, take the information and manually upload to their system, as well as the businesses who are being onboarded and being asked for vast amounts of information that technology could support.

Detected has fixed this problem on both sides by focusing on how technology can make the process better. Detected think about KYB like e-commerce – how many businesses arrive, on one side, and how many are onboarded on the other side.

Detected utilises over 1,700 data sources – including big providers such as Orbis as well as local providers in different countries – to create a detailed and accurate profile of any business in the world. It supplements this with information that can be added by the business that is being onboarded.

Detected uses an advanced matching algorithm to simplify the process – the algorithm combines all the data to create the most up-to-date profile of a business. The level of matching is over 98% and the experience is connected via powerful APIs.

“We can’t innovate unless we are creating proprietary technology and the advanced matching algorithm is what defines our business.”

Using artificial intelligence (AI), Detected have built logic into their system so that genuine AI pulls the information together in a single source and creates AI insights, identifying fraudulent actors and determining risk categories at scale.

Ongoing management is an important aspect of the system according to Chennells, as the client is alerted when anything changes within the business.

Chennells sees Detected as “the world’s first fully end-to-end KYB software.”

“Detected is the world’s first fully end-to-end KYB software.”

Frictionless onboarding – Easily capture verified information about your business customers anywhere in the world, with just one link.

Why Detected?

A customer-first approach to business onboarding
Unlock growth – Achieve a faster time to revenue and lower churn rate
Improve efficiency – Reduce your operating expenses
Gather unrivalled global business data
Partnerships – The onboarding platform of choice for Fintech – Detected is an accredited Visa Fintech Connect partner
Business profiles – Capture and monitor exactly what you need
Technology that scales and is built for enterprise

For more insights from this December's conference, see the Asset Finance International website
European equipment

The race to attract, develop and retain industry talent 


The importance of inclusion and diversity in recruiting and retaining the skills and talent needed in the asset finance industry was a prominent issue raised in a number of sessions at the AFC June conference, with a group of young ambassadors discussing the components of diversity strategies that are crucial in attracting and retaining a pool of talented people.

Building and growing the right relationships between staff and clients and partners is of paramount importance to the auto, asset and equipment finance industry.

SGEF’s Florence Roussel-Pollet pointed to some historical long-term partnerships of over 20 years at SGEF, stressing the importance of building these relationships by shifting together as a company’s business model transforms. Developing strong and close relationships helps lenders and partners overcome adversity and address the current economic situation.

To meet these growing challenges and changes in our societies and economies, companies must create diverse teams, to reflect the wider diversity of business and society at large.

“There is a war for talent and it is really an employee’s market at the moment.”

Ylva Oertengren, Chief Operating Officer, Simply Asset Finance

Within the UK market, the number of job vacancies currently exceeds the number of job seekers. According to McKinsey, 53% of employers are experiencing greater voluntary turnover than they have in previous years. And 64% expect this to get worse over the next six to 12 months.

Therefore, companies now more than ever are in a talent war to attract new talent to a company and retain new recruits and hires. Ylva Oertengren, Chief Operating Officer at Simply Asset Finance agrees: “there is a war for talent and it is really an employee’s market at the moment”.

Businesses need to consider corporate responsibility in the context of diversity as social exclusion and low economic activity rates can limit business markets and their growth. Corporate responsibility was previously centred on environmental issues, but an increasing number of employers now take a wider view, seeing the overall image of an organisation as important in attracting and retaining both customers and employees.

Oertengren highlights that many new young employees have a passion to work for a purposeful company in a purposeful industry: “unless you can explain why the company’s values are important, then you won’t get the best out of people”.

People want to work for employers with good employment practices and they also want to feel valued at work. It is important to create open and inclusive workplace cultures in which everyone feels valued, respects colleagues, and where their contribution is recognised.

As Nathan Mollett, Head of Asset Finance at United Trust Bank points out, “The next generation of talent put greater emphasis and importance on working for an organisation that has common values and common purpose.”

Matthias Grossman, CEO Commercial Finance at Siemens Financial Services believes that a company’s values are increasingly important to future employees.

Key areas of debate

Four young ambassadors from the asset finance industry – Alex McWilliams, Communications Manager at Simply; Lauren McQuilken, Business Development Manager at United Trust Bank; Jessica Hall, Business and Performance Manager at NatWest Group; and Ricky McNeil, Director of Operations at MAF Finance Group – discussed the topic in greater depth at the AFC June conference.

They considered the three key areas highlighted in McKinsey’s 2021 research entitled, ‘Great Attrition’ or ‘Great Attraction’? The choice is yours’:

  • avoiding transactional relationship
  • career development and progression
  • providing a sense of community

According to McKinsey, if companies make a concerted effort to better understand why employees are leaving and take meaningful action to retain them, the Great Attrition could become the Great Attraction: “By seizing this unique moment, companies could gain an edge in the race to attract, develop, and retain the talent they need to create a thriving post-pandemic organisation.”

“The next generation of talent put greater emphasis and importance on working for an organisation that has common values and common purpose.”

Nathan Mollett, Head of Asset Finance at United Trust Bank

Avoiding transactional relationships

McWilliams believes that while work is always going to be transactional, a transactional relationship can only take an employer so far with their employees. People want to be valued and credited for their experience in ways other than remuneration.

However, over the last two and a half years, a lot of people have been affected by the Covid pandemic which created a slight separation between employees and employers, and relationships were no longer going to be enough. According to McWilliams, this can be resolved “through good culture, making sure that your employees feel like they’re in a sort of a safe space where they can communicate properly, making sure that there’s career development opportunities as personal and professional development opportunities.”

By keeping communication open, reducing separation and creating a good culture where people feel valued and able to talk freely about their aspirations, enabling employers to understand their employees, the relationship will start to feel less transactional resulting in increased productivity and employee engagement.

As stated in the 2021 McKinsey article, “employees want meaningful—though not necessarily in-person—interactions, not just transactions.”

In McNeil’s experience, salary and bonuses have only ever been a short-term retention plan. If a company is using financial incentives as a key retention strategy, then they are going to struggle to create any long-term relationship or loyalty with employees.

Reverse mentoring has been frequently highlighted as a tool to help companies understand the next generation’s culture and values, and to improve employer-employee relationships. This is a two-way benefit as the young ambassadors get a rewarding working environment within a purposeful company that helps them develop, while the senior management that the young talent is reverse mentoring gain huge benefit as well. As Roussel-Pollet highlighted, there are many initiatives going on inside organisations like SGEF that the young ambassadors and young talent have bought to management and that have since been implemented.

Career development and progression

McNeil believes that career development and progression is an extremely important part of retaining talent, and a key area of most employee’s strategies. When a company has the right culture in place, they are able to empower employees to take ownership of their own development by signposting people to routes of opportunity, highlighting success stories and resources.

Nathan Mollett agrees that “giving younger people within the organisation project management responsibility is also viewed as a promotion in terms of career progression and keeping them interested”.

Employees are increasingly focused on opportunities for development and progression in their role, as well as striving to find an employer who has similar ideals to them, with a sense of responsibility, culture and teamwork.

Having the right conversations with employees to understand their development ideas and where they want to go in their career is vital for employers, according to Hall, so that they can help and support their employees, and point them in the right direction.

As McWilliams concludes, “it’s about having an open dialogue and creating a space where employers listen to what it is that employees want.”

“It’s about having an open dialogue and creating a space where employers listen to what it is that employees want.”

Alex McWilliams, Communications Manager, Simply

Sense of community

Most young people entering a new role in a new organisation want to enter an industry that has a sense of community within the company and within the industry as a whole. Hall believes the asset finance industry offers a lot of opportunities to do this.

McWilliams points to the innovative work carried out by the Leasing Foundation’s Next Generation Network in boosting community and encouraging businesses and lenders to push their employees to network and collaborate with their peers in an open and inclusive environment, giving them a significant advantage when it comes to seeking advice and guidance. She reports, “it is gaining traction and that community is getting bigger.”

Socialising with the competition was previously frowned upon, recalls Mollett, but things have changed and “the more you can do to empower colleagues within your organisation to build a network outside of your own, that actually plays into colleague retention, rather than increasing the risk of them leaving.”

As United Trust Bank’s McQuilken states, “retention is one thing, but attraction is another.” Attracting young people to the asset finance industry is something that must be addressed according to MAF Finance Group’s McNeil: “initiatives and schemes that can be implemented through the Leasing Foundation, for example, to help look at how we attract more talent, through graduate schemes, apprenticeship schemes, even looking at school leavers. The more that the Foundation can do to support this the better and that’s one of the ways we’ll tackle the attraction issue.”

Jeff Lezinski, SVP, Solution Architecture at Odessa discusses Odessa’s thoughts and initiatives on attraction and retention of new talent within the industry.

As Nathan Mollett, who is also Chair of the Leasing Foundation, notes turning attrition into attraction isn’t easy in any industry because it requires companies to really understand their employees.

Simply’s McWilliams believes that a good company culture is the key to successful employer-employee relationships.

Looking to the future

To create a healthy future for the asset finance industry, time and investment is needed to attract and retain a pool of talented people who can pass on their culture and values to companies and the industry as a whole in these changing times. Without the proper tools, such as career advancement and providing a sense of community, the industry will be unable to recruit a team of diverse individuals who can relate to an increasingly diverse client base.

Organisations such as the Leasing Foundation have launched a number of projects and initiatives to help the asset finance industry attract, develop and retain a new generation of employees, including the Next Generation Network, a network for the next generation of business financial professionals, the Diversity & Inclusion Initiative, and 30 Under 30, an annual list of individuals who are driving forward the asset finance world today.

For more insights from this June's conference, see the Asset Finance International website

Analysis from Nathan Mollett Chair of the Leasing Foundation

The discussion with the Next Generation Network young ambassadors raised a number of key points and strategies that are particularly important when attracting and retaining talent to the industry.

Companies must provide new and current employees with development opportunities, which should be discussed in the recruitment process so that candidates can visualise progression. However, feel free to be creative about these development opportunities! They don’t have to simply be promotions; development can also come in the form of project responsibility. Any exposure you can give your new talent to make a change or IT related projects are of high value.

Company culture is particularly important to the next generation of talented professionals coming into the industry and this needs to be emphasised at the initial stages of recruitment. Companies should double check that their culture and values are relevant and appealing to younger people. Environmental issues and inclusivity need to feature here, as these important issues help to create common values and goals with a younger generation.

Another area that I feel is particularly important when recruiting new talent is language and tone. Words and terminology should be used that reinforce the greater good that is achieved through their activity in the organisation. Rather than focusing on how many deals they have helped transact and how much profit they have made, the emphasis should be on areas of positivity relating to the company’s culture and values such as focusing on how they have helped SMEs grow or potentially helped drive the green agenda. This is a different type of messaging to that seen and experienced in the industry 10 or 20 years ago, but this type of authenticity is particularly important to a company’s culture and values as we move forward.

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European equipment

Scope 3 emissions: biggest reporting challenge yet?


ESG standards measure a business’s impact on society, the environment, and how transparent and accountable it is. ESG is fast becoming a mainstream consideration for all investors, and was one of the key topics discussed at the first summer AFC face-to-face event since Covid.

Investors are increasingly scrutinising ESG performance – and looking for companies to rise to the challenge. Environmental ESG reporting is now more prominent with increased regulatory pressure to report on emissions with Scope 3 reporting.

A panel of industry experts comprising John Rees, Community Head, Equipment Finance at Asset Finance Connect, alongside Karima Haji, Director of Transformation at Scania UK, Michiel Kranenborg, Manager Group Finance & Reporting at DLL, and René Kim, Founding Partner of Steward Redqueen debated the issues surrounding Scope 3 emissions measurement, management and reporting at the AFC Summer conference.

Scope 1 emissions: direct Green House Gas (GHG) emissions from company-owned and controlled resources, e.g., emissions released into the atmosphere as a direct result of a set of activities, at a firm level.

Scope 2 emissions: indirect emissions from a company from the generation of purchased energy, from a utility provider, e.g., all GHG emissions released in the atmosphere, from the consumption of purchased electricity, steam, heat and cooling.

Scope 3 emissions: all indirect emissions – not included in Scope 2 – that occur in the value chain of the reporting company, including both upstream and downstream emissions, i.e., emissions linked to the company’s operations.

Scope 3 emissions are all indirect emissions that occur in the value chain of the reporting company, including both upstream and downstream emissions. They are by far the largest source of emissions for most auto and equipment finance businesses.

Unfortunately, Scope 3 emissions are the hardest emissions to measure and manage and there are significant problems around reporting on them as there is a myriad of Scope 3 emissions along the value chain.

René Kim, Founding Partner of Steward Redqueen explains what Scope 3 emissions means for an asset finance company:  

In order to effectively manage scope three reporting, companies must stay on top of the usage data. So essentially, practitioners in the industry must know how often their asset is being operated, and what emissions it is making during the life of the finance agreement to be able to report the data.

“There are three levels to managing Scope 3 emissions: improved efficiency, cleaner fuels and new technologies.”

René Kim

Kim highlights that there are three levels to managing Scope 3 emissions: improved efficiency, cleaner fuels and new technologies:

  • Improved efficiency. Efficiency of the asset and its components e.g., machine performance, better engines, transmissions, tyres; operational efficiency – is it the right asset for the right task; pricing – what can be done on the pricing side to entice a customer to make more efficient use of the asset, e.g., usage-based business models.
  • Cleaner fuels. Liaise with vendors to see whether the assets can run on cleaner fuels; incentivise a client to use cleaner fuels.  
  • New technologies. Can newer technologies affect residual values and render an asset obsolete?

For bank-owned finance companies, banks are already falling in line with their net zero reports, while asset finance and leasing companies need to start looking at the processes and setting targets.

The first step in the process is to measure and disclose – as Kim points out, companies must “measure what you can, estimate what you must and make sure that, over time, you have systems in place to get better data, especially for new assets.” Companies must also set targets which can be difficult when you need to set a target on something that is beyond your control, but over time things will become clearer and easier. Kim warns that “not setting targets is not an alternative anymore.”

“Not setting targets is not an alternative anymore.”

René Kim

While many companies are announcing their target to be net zero by 2050, Kim advises companies to set a shorter term, for example, 2030, which means focusing less on new technologies and more on improving the Scope 3 emissions within current regulations and within current technologies.

When discussing current actions in the ecosystem, Kim highlights three areas of focus for asset financiers:

  1. The need to finance the growing demand for infrastructure, housing, and food; the whole system, not just the asset, but also the supporting infrastructure.
  2. Get involved with regulation.
  3. Engage in continuous conversations between vendors and clients: What are the technology roadmaps? What is possible on the OEM side? What are the real needs of clients? Scope 3 emissions reporting has made companies look at the planet and their carbon footprint – business is not only about profit, it is also about the reputational risk of being seen as a polluting company which can be extremely damaging for the business.  

Case study: Scania

Scania has a very strong roadmap up to 2030 to reduce their carbon footprint, by 50%, by 2025, for Scope 1 and 2, and then by 20% for scope three emissions. In 2017-18, Scania launched a plug-in hybrid vehicle and currently in Sweden, Norway and Denmark their battery electric vehicles are thriving.

Karima Haji, Director of Transformation at Scania UK hopes that “by 2030-2035, Scania should be able to offer a product that you can transition for all of your use cases across the transportation industry. We’re driving our agenda around new products, battery electric vehicles.”

Obviously, HGVs are very expensive assets and battery electric vehicles are more costly than diesel or petrol-powered vehicles, so Scania are looking at new business models, such as pay per use, to engage customers and allow them to transition towards battery electric vehicles and to reduce their carbon emissions through different business models. Haji points out that Scania want to work with their customers to make sure that the proposition is financially palatable.

In addition to introducing new sustainable products and new business models to their clients, Scania is also keen to be part of the circular economy by working across the full value chain, looking at all the components sourced, how long those components will last, and what the lifecycle of those components will be.

Haji points to the work at Scania to initially manufacture products using green steel which helps in a circular economy when it comes to regulation and reporting:

Case study: DLL

The reporting process is different for a bank-owned leasing company such as DLL, who have distinguished the various portions of their portfolio due to their portfolio being made up of various different types of assets for which there is “no single one-size-fits-all roadmap”.

DLL have therefore disaggregated their portfolio and are now working on what Michiel Kranenborg, Manager Group Finance & Reporting at DLL calls “a theory of change”, looking at every part of the portfolio where they can engage with vendors and end users to see what is possible for the end user and come up with a journey for that part of the portfolio, moving it from the current high intensity emission asset to the lower or zero emission type of asset.

DLL as a leasing company will work with the vendor to see how they can come up with a package for the end user that is attractive rather than pushing something that they cannot use.

“The key is that you should help your end users make a change, which will then be reflected in your Scope 3 emissions.”

Michiel Kranenborg

In addition to proposing increasingly sustainable packages for the end user, DLL is equally happy to promote a circular economy, helping the planet through the transition and reusing assets or asset components to create a second and third life for assets. DLL will buy secondhand assets, refurbish them and lease them out, because they believe that the value chain has not ended yet.

However, sometimes in its second or third life, the equipment may have higher carbon emissions because it is slightly less efficient than it was. However, it stops the original manufacturing process and, on a net basis, even though the emissions of the used asset are higher, they are still less than the original manufacturing costs of new equipment. This refurbishment concept can therefore cause problems when it comes to Scope 3 reporting.


While Scope 3 reporting provides the opportunity for companies in key industries to multiply their carbon reduction impact by decarbonising their supply chains, there are several challenges when measuring and reporting Scope 3 emissions:

Data. When reporting Scope 3 emissions, there can be problems with the consistency of data, the risk of double-counting, and availability of accurate data. This is the case for bank-owned leasing companies who are not as close to the asset and data as an OEM, for example. There is also the issue of who owns the data from the asset. 

At Scania the data is owned by the customer, not the OEM. Scania may generate the data from their sensors, particularly in the Scania trucks, but they offer customers service packages, such as a data monitoring package or a reporting package, which allows the customer to monitor fuel usage, driver efficiency and the CO2 emissions from the amount of diesel.

Methodology. There can be methodological challenges involved in capturing scope 3 emissions. These include estimating emissions for suppliers that do not calculate their own emissions, defining an appropriate calculation approach for each Scope 3 category whilst recognising that double counting may occur when emissions are aggregated across multiple organisations. 

Refurbishment issues. Michiel Kranenborg, Manager Group Finance & Reporting at DLL highlights a further inconsistency with Scope 3 Reporting: “DLL do a lot of asset refurbishments as part of our sustainability drive…. but in the calculation of financed emissions, probably refurbished slightly older assets will score less than a brand-new asset. So, in the financed emissions calculations and disclosure, there is an incentive to not refurbish because that will increase your emissions.”  

The European Commission’s Corporate Sustainability Reporting Directive (CSRD) which envisages the adoption of EU sustainability reporting standards, sees refurbishment or the circular use of assets as one of its cornerstones. However, this is in contrast to Scope 3 reporting as Kranenborg highlights in the video below.

Risk of reporting. There is a risk that emissions reporting and reporting requirements will become so onerous that it will stifle innovation. As Kim notes, “companies could be very environmentally sensitive, and have good internal policies that follow a good ESG strategy. But if they can’t send the necessary reporting to their shareholders, to their regulators, it defeats the purpose of being that environmentally friendly company.”

Looking to the future

Scope 3 emissions can no longer be ignored. While it can be easy to forget the impact that extends beyond direct activities, “out of sight, out of mind” can no longer be an excuse. With such a high percentage of carbon emitted from assets along the value chain, and with so many potential benefits from reducing this carbon, it is fast becoming imperative for businesses to measure and reduce Scope 3 emissions.

Companies who are currently working to reduce their Scope 3 emissions have the opportunity to differentiate themselves from their peers and competitors. Effective Scope 3 reporting positions these companies as innovative, conscientious and forward-looking organisations who are working to reduce the environmental impact along the value chain.

DLL’s Kranenborg agrees that the world is changing and customers will see the reporting rules differently; this can already be seen when engaging with customers and seeing that vendors are changing: “it might hurt to make that transition but not making them essential in the end will hurt a lot more, because the world is changing.”

For more insights from this June's conference, see the Asset Finance International website

Analysis from John Rees head of Asset Finance Connect equipment finance community

The overriding imperative call from the Scope 3 reporting discussion at the June Asset Finance Connect event is that the industry must act now and collaborate to solve the challenges of Scope 3 reporting and to find ways that the industry can design its products to reduce emissions not increase them.

The “challenging” topic of reporting related to Scope 3 emissions was discussed by an industry panel with plenty of audience input and participation. The discussion developed some ongoing topics that had been debated at recent Asset Finance Connect webinars.

Marije Rhebergen, global head of sustainability at DLL, commented in a recent AFC webcast that Scope 3 reporting is a very complex topic with challenging methodology. However, Rhebergen also pointed out the benefits of Scope 3 reporting from a business perspective: “This reporting creates a wealth of data which can be used to better steer the company in a greener and more efficient direction.”

Scope 3 reporting is not an easy topic for the industry to manage – partly because at this point in time the rules are not fully defined. But the message that came across strongly from the expert panel at the conference was “to get involved in the discussion so that the regulators appreciate what the industry can do”. It was strongly recommended that leasing executives get involved in the ongoing debate with the European regulators to ensure that the industry’s voice is heard in the discussions.

As René Kim commented, “the industry has not engaged with the regulator… they’ve come up with an idea that prescribes the process rather than the outcome. And I think this is why it’s so crucial that the industry gets involved.”

Patrick Beselaere, Chair of Leaseurope, who was attending the Scope 3 reporting panel discussion, urged the industry to work together, to engage in discussions with the regulators and technical experts, and also to reach out to politicians, in order to find “a good balance between the green ambition and the economy.”

Current expectation amongst asset finance industry leaders is that asset finance companies are going to be asked to report on emissions from assets that are not in their possession and for which they have limited control over the asset’s use. Let’s take a working example – a lessor provides an item of construction equipment to a civil engineering customer on a five-year operating lease. The contract has unlimited “hours” usage in its terms so it is up to the lessee as to how much he wants to use the diesel engine powered excavator. Scope 3 emissions reporting data as currently drafted would require the lessor to report the amount of emissions the excavator engine had made. That is not an easy task for the lessor unless there is some form of web-enabled reporting link between the machine, the user, the manufacturer and the lessor.

This example shows how complex Scope 3 emissions reporting is going to be for lessors and hence the urgent need for the industry to get involved in the debate as to what exactly these reporting requirements will require lessors to report.

The key messages from the AFC conference and recent Scope 3 emissions debate in the industry has been – understand the complexity of the reporting requirements, get involved in the discussion with regulators and collaborate with industry executives to solve the challenges of Scope 3 reporting. Asset Finance Connect will be seeking to enable this industry collaboration through their conferences and digital events in 2023.

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Building the world’s largest independent asset finance provider


After a glittering career at the very top of the asset finance sector, Bill Stephenson has put retirement on hold, opting instead to seize the opportunities cloud-based technology offers for innovation to create a new world-leading independent finance provider.

Addressing an Asset Finance Connect webinar, the latest in a series sponsored by Solifi, Stephenson laid out his ambitions in his new role as CEO of HPS Global Leasing, which include PEAC UK and PEAC Europe.

The record audience of 250 delegates from 30 countries heard Stephenson explain that a period of self-reflection during Covid had encouraged him to look for new challenges.

As he observed: “Let’s face it, there hasn’t been a new global competitor entering the marketplace in over 20 years. My aim is to build the largest global independent brand with a very strong differentiator.”

And for Stephenson, that means not working with a bank; a strong growth and acquisition strategy; and a global rather than regional presence.

Hear Bill talk about re-igniting the feeling of waking up with “hunger in the belly”.

“My aim is to build the largest global independent brand with a very strong differentiator”

Bill Stephenson


As Stephenson acknowledged, one of the biggest challenges for bank-owned lessors right now is the impact of regulation, with compliance issues taking up senior management time that could be spent finding better ways to serve customers. During the 2008 financial crisis, a bank’s leasing arm was left often fighting for relevance as it was previously viewed as little more than a conduit for excess profits from its parent. Not any more, though, as leasing operations are now embedded as a vital part of the bank’s business.

“But the problem is that the regulators don’t understand the difference between consumer loans or mortgages and leases. All those rules that are being forced on the industry are disruptive to customers – banks are losing 5% of customers at the onboarding process as it’s so cumbersome,” Stephenson pointed out.

Hear Bill discuss how independent lessors are set to challenge the banks’ market domination.

Stephenson also predicts that in the future, successful lessors will be those who offer additional services, including maintenance and refurbishment, and who control the asset lifecycle, which will prove a further barrier to banks, particularly when it comes to new concepts such as pay-per-use.

“Banks are losing 5% of customers at the onboarding process as it’s so cumbersome”

Bill Stephenson


Stephenson told his audience that a major frustration over the last ten years has been around IT, and in particular high costs and limited flexibility. The aim at HPS is to come straight out the gate using the latest cloud-based technology and APIs for direct links with clients.

“The challenge with legacy IT systems is that you can’t just delete what you have and add a new function, in the same way as you add or delete an app on your phone. Instead you need to rebuild and then when you fix one thing, something else breaks,” he maintained.

Listen to why Bill sees cloud-based systems as the future.

In Stephenson’s eyes, all transactions need to take place at the point of sale, rather than being taken back to the office to be completed. “In a recession, there are going to be fewer transactions and that means more and more people competing for each customer. The only differentiator is how well you service that customer, and the most seamless way is to close at point of sale,” he explained.

Bill explains the changing role of the salesperson.

HPS’s current focus is on business in central and eastern Europe, the Nordics, the US and Canada, and while keen to avoid over-expansion at an early stage, Stephenson said the company is not done with acquisitions in order to build market share.

“There’s not a lot of organic growth, so we will be looking to take market share through our value proposition, which is based on the principles of service, trust, transparency and true partnership, and not on price, rebates, false residuals or fake approvals,” Stephenson declared.

In competing against bank-owned lessors, much of the “secret sauce” for success is down to creating the services customers want, innovating quickly and flexibly, and product development, all of which is driven by technology.


Acknowledging that sustainability issues are coming to the fore in both Europe and the US, Stephenson cautioned that there is no “big switch” to force compliance with a new green approach, but that lessors should work with their customers to develop the right strategy.

“There is no one silver bullet solution, and we need to be there to support vendors and clients and to help them through the transition, rather than dictating what we will or will not fund.

“We need to get the industry to move away from a ‘sell and go’ approach, as there is so much we can do around the circular economy which will impact ESG. We can help companies take product through all possible lifecycle stages and refurbishment and, at the end, extracting rare earth materials so that they can be re-used. There is only so much of that on the planet, so salvaging what we have is important,” he explained.

Hear Bill outline lessors’ roles in the second and third life of assets.

Looking to the future

In response to audience questions about the risks for lessors of being left holding “dirty” assets which had lost value because of sustainability concerns, Stephenson pointed out that the supply chain crises provoked by Covid, and subsequently conflict in Ukraine, had underlined the value of lessors controlling the entire asset lifecycle.

“We’ll see this evolve more towards a focus on selling services, maintenance and refurbishment, as opposed to the usual idea of ‘build it and burn it’,” he argued. “And one of the advantages of being a global entity is the ability to move those assets on. There is a natural transition and move towards green equipment, and that will happen.”

But for the immediate future, Stephenson is clear that utilising the latest technology to create genuinely frictionless customer experiences and to innovate new products is the way to go. With lessors able to control the whole lifecycle of an asset, the circular economy is becoming a reality for those with the flexibility to respond.

“There is a natural transition and move towards green equipment, and that will happen.”

Bill Stephenson
For more insights from the Fireside Chat with Bill Stephenson, watch the Asset Finance Connect webcast sponsored by Solifi

Analysis from John Rees head of Asset Finance Connect equipment finance community

It’s fair to describe Bill Stephenson as a legend within the asset finance industry. Over the course of a 35 year career, he played a huge part in building DLL’s position as the global market leader in bank-owned vendor finance and a major player in the equipment leasing sector. As well as his CEO role, with responsibility for a €35 billion-plus portfolio, Stephenson was also a highly influential chair of the Equipment Leasing and Finance Association in the US.

So the obvious question is, having achieved so much by retirement age, and with the golf course beckoning, why take up another senior executive post?

Bill’s answer was to use the analogy of moving house – essentially, it’s always possible to improve on a property if you’ve got a lot of experience based on what you’ve owned before, and what you know new technology can deliver. So he is taking the benefit of his learning at DLL to mould a new, cutting edge, organisation.

Freed from the constraints of IT systems which have been developed over decades, with obsolescence built in, he is now looking to cloud-based technology as way of responding immediately to new requirements.

And Bill is clear that technology is only going to enhance, rather than obliterate, the role of the salesperson. That is why his response to a question from a young member of the audience about how to build a successful career was so valuable. The man who made it to the very top has two key lessons for getting there: learn to fail; and embrace rejection.

“Rejection is never personal. Hearing a ‘no’ just means you don’t understand what someone is asking to achieve,” is Bill’s view. It’s advice to take on board, as he views the greatest risk to the asset finance sector is that there are not enough of the next generation coming through the ranks.

All of us within the asset finance industry should also take to heart his other advice, which is the need for us all to join together and form a single entity to take on the regulators and make the case for our industry.


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SGEF: Sustainability focus heralds new ‘Golden Age’ for asset finance


Pandemic disruption underlined the need for the asset finance sector to be agile and reactive, and lenders who built strong bonds with their customers and vendor partners have reaped the benefits. Now the industry needs to adopt the same approach to deal with the challenges presented by the sustainability agenda, according to Jochen Jehmlich, CEO at Société Generale Equipment Finance (SGEF).

Speaking at an Asset Finance Connect Senior Executives Fireside Chat, sponsored by Solifi, Jehmlich predicted a potential “golden age for asset finance to come”, pointing out that the urgent pressure for businesses and the whole economy to adopt climate-friendly ways of operating means that all assets will need to become greener.

Jehmlich predicts a potential “golden age for asset finance to come”,

“Countries and governments have committed to reducing CO² emissions dramatically over the next few years. That means the whole economy has to run on electricity or hydrogen. It’s not about whether as lenders we should fund only solar panels or wind turbines—it’s about exchanging all assets for greener options.

“In areas like vehicle fleets and commercial equipment, everything will need to be replaced”

Jochen Jehmlich


While acknowledging the pandemic had come as a “big surprise and we were not super prepared”, Jehmlich said SGEF’s decision to offer a moratorium on payments and subsequently a staged approach to scheduling repayments had proved successful, with almost all customers back to regular payments by the end of 2020.

“We were proactively seeking a joint way forward. You build good customer relations in the bad times, and not the good times,” he noted.

Jehmlich also pointed out that, with offices shut overnight and overseas travel on hold, digital transformation had happened at a much faster pace than previously anticipated. Within a month, all employees were working virtually, and digital technology became a lifeline.

“Suddenly it was possible to sign a contract from home and all the hurdles the legal department had raised before were pushed aside. We have made a jump forwards in terms of digital working”


The focus on ESG issues at both organisational and country level is proving to be an equally disruptive event, as is already evident in the auto industry. There is also pressure from governments who are linking funding subsidies to investment in green technologies and approaches.

“There is a clear understanding that there is a connection between global warming and CO² emissions, and countries and governments have committed themselves to reduce CO² dramatically. It’s not that all our assets we finance today will get greener – they all have basically to be exchanged. All these replacements have to be financed, and we should be in a position to catch some of it,” Jehmlich stated.

SGEF, as part of a big multinational group, has already made a tranche of sustainability commitments, including dropping out of financing anything related to coal, withdrawing financing for oil and reducing and eventually ending lending for certain forms of gas.

“But we are not converting into NGOs – we are still profit driven organizations with a decent return on equity targets. We don’t want to end up with stranded assets or equipment with no value, but the question is how we make money with solutions that are attractive to our customers,” Jehmlich said.

Residual values

One key issue is identifying and managing the risks in financing a new generation of assets based on constantly evolving technologies. ‘We can see this already, for example with electric buses for communities. They are used to the idea there is an open residual and they give the bus back after a while. Whilst we would have been prepared in the past to take it, or the manufacturer would take it, nowadays nobody wants to take it because a bus can run for eight years. Nobody knows how the battery life cycle will look in eight years,” Jehmlich pointed out.

While the auto industry has been the first to experience complete disruption as a result of new technologies, Jehmlich forecast that other sectors will also undergo a revolution. For example, as pressure grows for agriculture to focus less on meat production and more on plant-based production, that could see the introduction of new types of equipment, perhaps smaller assets which target specific activities.

“So, we look for new [green] assets, try to find solutions to finance them, and try to integrate subsidies,”

Jochen Jehmlich

Pay per use

One option is the growing interests in “pay per use” equipment deals, priced on a consumption basis. This requires the traditional approach to calculating residual values and pricing risk in contracts to change.

“We are talking about the circular economy, where the lender funds a new asset which the manufacturer subsequently refurbishes for a second life as a used asset, and which at the end of its life is broken down into parts which are re-used. But no one will jump into this new environment without thinking carefully about which risks they will take,” Jehmlich explained.

Currently, the second life value for a solar panel, for example, is unknown. But while electric assets are likely to be more expensive at the beginning of their life, the maintenance and running costs are potentially lower, suggesting they may have a longer life.

“That opens up the way for lenders and manufacturers to build a long term relationship with the customer and to sell lots of services, for example, updating services,’ Jehmlich said.

However, he cautioned that the uncertainties over who will take the risk over the life of the asset mean a true “pay per use” solution was some way in the future. Currently it is limited to certain areas, such as photocopiers, where there is a high volume of customers sharing one piece of equipment and where levels of usage are reasonably predictable. Nevertheless, such deals have to take account of not only the credit risk if the customer defaults, but also utilization risk, for example if there are problems in a particular industry sector so that turnover falls or customers desert that particular company.

But Jehmlich closed the session with a glimpse of the future possibilities. SGEF is working with Philips on a project which will see the medical equipment supplier take over the whole operation of a clinic for a 10-year period. The customer will pay monthly instalments, and the supplier will take care of the equipment and ensure the technology is upgraded as required.

He also put the asset finance sector on notice that change is inevitable. “I’m always astonished when at a leasing conference, how much less talking there is about the digitialization of the asset finance industry. If you compare that would other parts of the universal banks, there complete areas have been completely disrupted. And banks have been expelled from some areas. So we have to be aware that once in a while, there could be a disrupter coming in showing us a much simpler form of the industry, one we can’t imagine right now. Compared to the whole banking industry, business leasing and asset finance is quite a conservative part that goes very slowly, but that must not be the case in the future.”

For more insights from the Fireside Chat with Jochen Jehmlich, watch the Asset Finance Connect webcast sponsored by Solifi

Analysis from John Rees head of Asset Finance Connect equipment finance community

As head of SGEF, rated as the number one asset finance lender in the AF50 European rankings, with €9.8bn of new business across 35 countries, Jochen Jehmlich is very clear about one thing – it is no longer business as usual.

Covid-19 has already disrupted the sector, as some big businesses found they could no longer operate during the early days of the pandemic and so were at risk of defaulting on contracts. But as Jochen points out, by staying close to customers and building up relationships, it has proved possible to reschedule payments and bring lending back on track.

And in some ways, pandemic-induced change has been good for the industry. Digital working has become the norm, offering efficiencies and opening up new opportunities. And with supply chains squeezed, companies and their customers are more prepared to look at how to make the most of the assets they already have in hand, through better utilisation.

But the biggest change to come, Jochen predicts, is the requirement to respond to the intense pressure to move to a more sustainable model of working. The “use and throwaway” society, which consumes without thought for how goods are manufactured and what happens to them at end of life, is at an end. At first glance, this wipes out the traditional model of financing an asset for a finite time period, and then replacing it with a new item.

However, lenders have no choice but to look for new solutions, as government, business and the public make it clear that steps must be taken to address climate change and the adverse environmental impact of “dirty” industries like coal and oil.

That presents a challenge for asset finance providers, because the new “green” assets are based on evolving technologies and lack the track record necessary to assess risk and residual value.

As Jochen points out, this is already evident in the automotive sector and is set to spread to other industries imminently. One option is to move to a “pay-per-use” model, whereby multiple users have access to an asset and payment is assessed according to utilisation. While simple in principle, this is more difficult to manage in practice.

But as Jochen emphasises, the asset finance sector is going to have to find solutions to these dilemmas. And for those lenders who do, there are rewards ahead, with predictions of a ‘golden age’ for asset finance as businesses seek to replace older equipment with new, green alternatives. This is not the moment wait and see, because as Jochen explains, there are plenty of disruptors waiting in the wings to seize the opportunities that traditional lenders may be too slow or too timid to explore.

We are discussing what ESG means for the asset finance industry, and progress towards new models, in our equipment finance community. Register for our webcasts and join in the discussions.

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