Get In: The Connected Vehicle Podcast From BlackBerry (Episode 10)

Podcast Transcript

Steve Kovsky:
Hi. Welcome to Get In: The Connected Vehicle Podcast from BlackBerry. I'm your host, Steve Kovsky, and in this series, we'll be diving in to what the future of transportation just might look like. Today, I'm joined by a guest from overseas who is going to take us on a deep dive into the world of finance and how it applies to the cars of the future.

Brendan Gleeson:
Thanks, Steve. My name is Brendan Gleeson. I am the chief strategy officer for Solifi. Prior to that, I spent five years as the global CEO of the White Clarke Group. We were a specialist automotive finance software solution provider, which has since been acquired by Solifi.

Steve Kovsky:
I understand from what we've discussed in short form, that there's been some changes in how cars are financed and how banks work with the automotive industry. Can you tell us a little bit more about Solifi?

Brendan Gleeson:
With over 300 customers globally, Solifi is the leading global provider of SaaS solutions to the secured finance sector, offering market-leading applications, particularly in the automotive finance space, covering all aspects of the automotive finance business, including retail, fleet, and wholesale, so we've got a broad spectrum of experiences in that market. And our customers include some of the leading OEMs in the world, some of the world's leading banks, and indeed independent finance companies.

Steve Kovsky:
I see. Now, something we like to ask our guests, it gives us a sense of our shared experience, is what their first experience was in an automobile, or with automobiles, driving an automobile, and I think yours was a bit different than mine. Could you describe it a little bit?

Brendan Gleeson:
Sure. I grew up, as you can probably tell from the accent, in rural Ireland, and we didn't have a car. Neither of my parents knew how to drive, and I mean, that was fairly common for the families on our housing estate. It was a family of 12, so we wouldn't have been buying a car. We'd have to buy a small bus instead, but back in those days, the Irish economy wasn't anything like it is now, so it just wasn't affordable. We got around on bicycles, and walked, or whatever.

I got my first car after college, went to get my first job, and then I bought a secondhand. I believe it was a red Nissan Micra. And I was delighted with it, obviously. Gave me freedom I just didn't have. And at that point, the economy had turned around, and everybody had a car, and in fact, families had two cars. However, probably more interestingly is, my mother actually learned to drive at the ripe old age of 60. And now unfortunately, she had polio as a child, and she had lost one of her kneecaps, so she had one leg that was straight, so actually, any kind of transport was actually quite difficult for her. Even walking would have been difficult. Not that it ever bothered her. She managed to get by quite fine.

We decided we'd get her a car because she was, "You know what? I want the freedom," and I went, "Gosh, you're too old. This is going to be really hard." Anyway, we ended up buying a Renault, I'm sure it was, and it had the clutch on the dashboard so she could do that with her hand to operate it. For her, it was quite amazing to see. She saw the ability to be able to go wherever she wanted, whenever she wanted, as tremendous freedom that she had never had before, and in all seriousness, for her, a car literally was liberation. It was great.

Steve Kovsky:
I'm so impressed by the boldness of spirit that it took to do that, but cars are liberating for many of us, and in many ways a rite of passage. That hasn't changed, but there's a lot that has changed, especially in the last few years, and it seems to really have accelerated. Could you talk about some of the challenges that the industry is facing right now, and how you're helping them cope with those challenges?

Brendan Gleeson:
The auto finance industry is going through one of the most disruptive and challenging periods in its entire history, and the background to that is we're operating in a world where that's characterized by explosive innovation, and that means that there's a lack of predictability, so in turn, that agility is key. So we would see enabling digital and operational agility as key drivers in our industry, and also key drivers for Solifi's products.

Now, everybody in our industry today is talking about innovation, and yes, it's true that the COVID pandemic has accelerated the shift to digital channels. McKinsey, in one of their reports, calls out a very interesting statistic, that showed that digital adoption went something like 25 times faster than they had planned, and that's quite a significant achievement.

However, people have become a bit over-focused on it, and it isn't an overnight miracle, because I like to remind our customers of Amara's law, which states that we tend to overestimate the impact of technology in the short run and underestimate its impact in the long term. To me, I think it would be legitimate to look at digitalization as the dotcom effect in the long run. But there's a lot more going on, and our industry today has to contend with a far more challenging digital ecosystem, and a broader base digital ecosystem that exists today.

Steve Kovsky:
Digitalization is absolutely a huge topic in every industry, and it is interesting how it's taking shape in the automotive industry, and especially in the automotive finance. Could you talk a little bit more about the broader digital ecosystem?

Brendan Gleeson:
It's complex and difficult to understand. The way I like to come at it is to try and understand it from the interaction of three different perspectives. First you have the change in customer behavior, the changing nature of the consumer. Then we have the explosion in technology innovation, and then we have the emergence of brand-new alternative business models, with the security and regulation acting as something of a drag factor on innovation there. 

Steve Kovsky:
Yeah, give us an example of each of those if you could. 

Brendan Gleeson:
If I talk about it in general terms first, most people are aware that there has been a shift. On the customer side, you can see the changing expectations, the shift from ownership to usership, and that's coupled with the emergence of innovative business models driving things like the subscription and sharing economies. We've also seen several significant technical innovations, everything from cloud computing, the Internet of Things, big data, 3D printing, 4D printing, autonomous vehicles, and so on, but without a shadow of a doubt, the biggest single technology innovation we've seen has been the explosive growth of artificial intelligence, and its all-pervasive application. It's everywhere today, and it's powering all sorts of applications, and it's extremely, extremely powerful.

So, this ecosystem is difficult for our customers to understand, indeed difficult for us to understand sometimes as well to be truthful, and because it's not about a single dimension like digitalization, more it's about the interplay of different dimensions. For example, where you have the changing expectations that customers have, the changing nature of that customer, and how that is shaping digitalization, and how digitalization itself, in turn, is shaping customer behavior and expectations, and how both of those coming together are driving out and exploring, and it's forcing the exploration of new business models in areas like subscription.

And technical innovation in itself is allowing the emergence of brand-new disruptive business models. One of which I think is particularly relevant today, for our industry, is when you look at the combination of artificial intelligence and the internet of things in the context of the connected vehicle and the kind of opportunities that we present for our industry.

Steve Kovsky:
The other thing that interests me is the idea of the change from ownership to usership, and while we've seen shared vehicles become very popular around the world, and the Ubers and Lyfts of the world, I have not seen what I've heard described in a trend is that people are getting away from wanting to own vehicles. But I have a very narrow, North American view. Are you seeing it globally? Is it occurring on a larger scale, or is it still sort of a future trend?

Brendan Gleeson:
That's a very good question, because there's quite a bit of hype attached to all of this. If you actually look at the data now, vehicle, car sharing, as opposed to subscription, and they're two separate things, but they're related. Car sharing hasn't taken off as much, as yet. Will it? One of the effects the pandemic has had is people like to have their own clean, secure space that they aren't going to pick up bugs and so on, so I think it is a thing for the future. It is happening. It's not going to go away. It does exist, but it's working better in certain sectors than it is in others. I don't think it's a North American versus European thing. I think it's more or less a case of each market is exploring it in its own way. But it has been somewhat over-hyped would be my guess.

If you look to the future, right out a good bit, and you say, "Okay, what space could I be in?" I could be in a situation where I get into what would be called the robo-taxi. I could have an electrically powered vehicle, that is a utility vehicle, that essentially has been 3D printed, so cheap manufacturing, and it is controlled by artificial intelligence, and I could have that operating in urban areas, where I could pick you up from your house and take you to the local restaurant, whatever, and all you'd have to do is get in. It's essentially like a personalized bus, for want of a better expression. I would say that that, I think that is going to happen, right? How far away it is, that's anybody's guess at this stage, so that which is real.

On the subscription side, there is a general trend towards subscription-based productions, so Netflix and so on, the way in which people buy music, so that has become ingrained in the consumer, that we should have a subscription offer, and trying to get that to work in the automotive finance sector has been particularly challenging. It's actually interesting to see the number of failures versus the number of successes. 

Steve Kovsky:
Interesting. Well, I'm sure Solifi has a solution there, that will work, and I think this is another instance where Amara is going to... He's watching. He's patient. We may discount it for now, but just wait a while.

Brendan Gleeson:
Yeah, you would, because actually, if you think about it, EVs are becoming obviously popular. In fact, in the UK by 2035, then all cars that are sold will have to be EVs at that time. I can't remember what the date in the U.S. is, but it's similar, and many of the OEMs have committed to actually eliminating non-E vehicles from their production within that kind of timeframe.

We will see. The truth is, I have a belief that if you think about EVs and the state of battery technology, that it might make a lot of sense now, for the battery to be made available on subscription. You can buy your car if you wish, but you get the battery on subscription, and as battery technology evolves and gets better, then you have the ability to swap it out. Because if I was buying an EV today, I would be worried about, "Well, I'm buying today's battery technology," and battery technology simply has to get better. If we're going to have a world of all electronic vehicles, then we have to be able to drive 600 or 700 miles on a single charge, and that's not the case today.

Steve Kovsky:
Very, very interesting, and that's a brilliant idea in itself. Let's talk a little bit about artificial intelligence, the Internet of Things, the proliferation of data from vehicles. Help us get our head around, how is this changing things?

Brendan Gleeson:
This is a particularly important area, and it has a number of dimensions to it. Right now, I would say we're entering the area, if we're not already in the area of the software-defined vehicle, where the software and the data-driven user experiences are going to become more valuable than the vehicle itself. That's quite an important perspective if you're an OEM. Where is your value? Is it in the car or is it in the software? And the average car produced today has something like 100 million lines of software code that comes with it, and throws off about five terabytes of data every hour, so that's a huge volume of data.

To me, that represents a huge monetization opportunity for our industry. Now, alas, the auto and auto finance industry has been not as good as other industries in terms of capitalizing on that monetization opportunity, but thankfully, the industry is waking up to the opportunity, and beginning to make some strides in that area, particularly the EV OEMs, who are actually starting to capitalize on the monetization opportunities that are there. But as I said, the industry's waking up to it. All the OEMs are now thinking about it, and everybody has plans, but we've been a little bit slow, I would say.

And if we're going to get the value from the data, when you think about that volume of data, it's a huge amount, so if I say it's five terabytes of data being thrown off the vehicle every hour, on an eight-hour day, that's 40 terabytes, and if I have 200 million vehicles with, say, something like the IVY™ platform installed, then I'm looking at an incredible amount of data, and it's almost impossible to manage. This is where connected vehicle platforms like BlackBerry IVY™ come into play, and they're key at unlocking the value of that data, because without something like IVY, you just won't be able to manage the data.

Their combination of the in-vehicle edge processing, where business value insights are derived from real-time sensor data, and where that's combined with IVY's cloud capabilities, so I can get some value from within the vehicle, I can get some local processing, I can manage that data there, and then I can have those insights shared into the cloud, where I can aggregate it with the rest of the data that I've got, to create even further insights and more opportunities. To me, there's a lot of potential monetization opportunities in there, not least around the area of personalization. And because of that, that's one of the reasons why we're delighted to have been invited by BlackBerry to join the IVY council and be the voice of the global automotive finance industry.

Steve Kovsky:
Now, when you talk about monetizing data, I think people get nervous when they hear that term, because they think, "Oh, that means they're going to sell my data." That's one strategy, but it's not the only one, is it?

Brendan Gleeson:
No, there's value in the data. People are correct. There'll be constant debates about whose data is it? Is it the OEM, or does the private individual own it? Does the finance company own it? Does the telecoms? That's going to happen, and that will have to get resolved, and the data has value, and the consumer is waking up to the fact that they realized that their data does have value. But there are a number of opportunities that just are broadly beneficial, and I don't see data ownership getting in the way of those.

Lots of opportunities, too many to go through here, but if I called out a few, in the area of residual value optimization. Many of the automotive finance products sold today, particularly when you're talking about leasing, involve a residual value component. This is essentially when I'm selling the car or buying the car today, and I'm putting it on, say, a two-year lease, as the finance company, I'm trying to establish what will the value of that vehicle be in two years' time, when it comes off lease? This is the so-called residual value.

It's an imperfect science. Today, the processes we use are predicting future value, based on data models and industry norms that people are used to. However, it's not based on the actual condition on the individual vehicle. I see quite a big opportunity here, where with something like the IVY platform, I can establish, in real time, the absolute actual condition of any given vehicle, and therefore, I am able to provide a more precise description and understanding of the vehicle's condition and its value at that point in time. That has a number of significant benefits, not least of which would be for a fleet manager who might have thousands of vehicles in their fleet, where this will allow them to have an up-to-minute continuous assessment of the value of that fleet.

For dealers, they would have the opportunity to optimize their remarketing approach to any given vehicle based on the condition of that. They can just pick which remarketing channel works for a given vehicle of a given standard, and also, for the OEMs, and the finance companies, and the dealers, it would allow them to make far more attractive retention offers to their customers.

There's a follow-on benefit to that kind of opportunity around the area of kind of an IVY-based CARFAX, as I would call it, which means I can produce a document and an assessment of the vehicle's current condition, and therefore what its current value would be at any given point in time. And if you think about when you're in the used car market, if you're a buyer or a seller, you're always wondering, "Well, am I being sold a puff? How good is this vehicle?" You know, "Buyer beware," and all the rest. If I have an independent, objective, scientifically produced assessment of the vehicle's condition and its value, then that's going to boost my confidence as the consumer to participate, and I would see this as being particularly important in the digital channels. One of the impediments to growth in the digitalization, to digitalization and the use of digital channels is trust and transparency are absolutely vital. Now, if I have this CARFAX kind of concept, and I have an accurate, up-to-the-minute, independent assessment of the value of that vehicle, then that does a lot to boost trust and transparency.

Steve Kovsky:
This is a trend that I have observed with my own children, that are all car owners. When they're looking at new vehicles, they're not just looking at buying it off a lot. They're looking at buying it from digital channels, where it will arrive at their house essentially sight unseen, and you are relying on those models of what the car is worth, and you've got the holy Kelley Blue Book, that tells you, universally, what the value of the car is. This is a lot more scientific, a lot more potentially accurate.

Brendan Gleeson:
The key impediment to the expansion of the digital channels, and driving more business through those channels, is this concept of trust, because you don't know if it's a used vehicle; you don't know what the actual vehicle's condition actually really is, right? And you don't know what its real-time value is. With something like the IVY platform, where the connected vehicle data allows you to establish the precise condition of that vehicle in real time, at the point at which you're trying to buy or sell it, then that is going to give you a huge boost to your trust, because you've got an objective, scientific assessment of the asset that you're about to purchase.

Steve Kovsky:
You know, it's been eye opening to me to learn that the revolution that's taking place technologically with the automobile is being mirrored on the financial side of the equation, and that that transformation is just as revolutionary, and probably just as painful for many of the parties that are involved in that. What do you see as kind of the near-term? What are you excited about for the manufacturers and for customers?

Brendan Gleeson:
I think the residual value optimization is quite exciting. There's a number of aspects to that, which we've covered I guess, to some extent, but there's a bit more going on there, so that's quite valuable. Another very important area in terms of what's available through this connected vehicle data, is this concept of predictive maintenance. Based on the sensors that are in the vehicle, which are monitoring all the components in the vehicle, if any of those individual components look like they are deteriorating, or have an increased potential to break down in the near or the medium term, then we can schedule that vehicle for early maintenance, and we can use the data in the vehicle, so that we know. The sensor data tells us what the condition is.

We can combine that with data in the cloud, that tells us what the dealer repair network has available in terms of maintenance slots, and I can pick an optimal slot for any given vehicle, and by having this preventative maintenance, I am avoiding the vehicle actually having an issue, and this has a number of significant benefits, not least of which, again, for fleet managers, this concept of minimizing downtime. If I've got preventative maintenance available to me, that will help me minimize downtime, which is a critical American metric in the fleet sector. This will also feed into lower overall maintenance costs and finance costs. And indeed, a better maintained vehicle is just going to have a higher resale value anyway, so everybody benefits.

There's also a safety benefit associated with this. If I have a well-maintained vehicle, where I am preventing it from having a breakdown, so it's not going to break down while it's in use, then I'm likely to experience fewer accidents, and that, in turn, should lead to lower insurance costs. Now, there's a whole host of areas that I would say where there are a bunch of different opportunities that will be available, and covering maybe like different areas. For example, pay per use is a really good one in my mind, and some of this, you see in action today, with people like Tesla.

I could, as a consumer, as a driver of the vehicle, decide that I want heated seats today because it's a bit chilly, right? I can have that for the day that I want it, and only pay for that day's usage. I am not having to buy heated seats up front, right when I get the vehicle. Another one I've seen Tesla use is the... because their batteries are software controlled, so you can buy extended range. What that means is that I can have an over-the-air update to my vehicle, so in real time. Now, I'm off for the weekend, I'm going to go on a long road trip, and I'd like to be able to get extra mileage out of my battery. I purchase that for the weekend that I'm going to use it. I get an over-the-air update, and my vehicle now has extended range. I think it's brilliant. There's a whole pile of things that can be sold on that kind of concept. Another one you see is pay how you drive, where you have dynamic insurance premiums that actually either they'll penalize you for poor driving and they'll give you a lower premium if your driving is better, so you're going to pay for your behavior, essentially. That's, to me, quite a good thing as well.

One area that is absolutely key, and I think there'll be lots of different opportunities, is the whole area of personalization. Because I have the in-vehicle data from a platform like IVY, and as I said, the vehicles are throwing off maybe five terabytes of data an hour, so a lot of data, and when I combine that with the information I would have in the cloud for that customer, and assuming that we have the customer's permission, but I'm able to bring that data together, and what I'm able to do then is to create much more precise, personalized offers for that consumer, that they are much more likely to take up.

Now, if I can get those offers into a subscription-type finance format, where I am subscribing on a regular basis, something like you pay $10 a month that allows you to switch on different features in your vehicle, for example. Then what that allows me to do is I can monetize the data for that vehicle over its entire life, and not just when it's been purchased or when it's been sold, because the average vehicle, say on a fleet for two or three years. That's a tremendous opportunity, and we've seen the consumer behavior. As we talked about the shift from ownership to usership. That's about subscription, at least to some extent. So that's a bit of an open door, and we need to be more creative about how we get to those offers. 

Now, those are all revenue-generating opportunities, and there's loads more, but it's also important to look at the cost-saving potential that this would have. Again, we talked about over-the-air updates. If we think about the average vehicle having 100 million lines of code on it, if the vehicle has an issue, then I can use the over-the-air capability to correct that issue in real time. That means I do not have to recall that vehicle for a physical recall, to go into a garage and get repaired, or to have software uploaded, or whatever maintenance be done on the vehicle. That's a huge cost saving, because vehicle recalls are expensive, and because they're recalls, the OEM is paying for it, not the customer.

Another area where you see some significant cost savings, there's a specialized part of the automotive finance business, on what we call floor plan, or wholesale as it's known in different countries. Here, a key process within a wholesale business is a physical vehicle stock check. They have people going around the country, going to forecourts or dealer guards to see if there are vehicles on the forecourt? What condition are they in? Have they been moved? Now, with something like the IVY platform's connected vehicle data, I can have the vehicle self-audit. The vehicle itself knows where it is, knows where it's been moved, knows what condition it is, so now I'm doing that for free. That's a significant saving. 

And finally, I would say we're going to see the emergence of data marketplaces and the whole concept of data trading. There was a concept a couple years ago, we used to talk about the $0 car, where the OEM would trade an element of the price, the sticker price of the vehicle, and give you a price reduction in exchange for you handing over the use of your data. And it wasn't that the OEM themselves were going to use that data directly. It's what they could sell it onto, like in a data marketplace. For example, if I go to you and you're buying a car for, let's just say it's $20,000, and I say to you, "I'll tell you what. If you allow me to have your vehicle data for the lifetime of this vehicle or the lifetime you've got the vehicle, then I'll give you $1,000 off that car," and you say yes, so now what the OEM has, maybe 20,000 of their customers signed up for this, or maybe 100,000.

Now, I have this (windshield) wiper data. What value does that have? Well, I could go to a weather company, who spend fortunes putting weather stations out on the countryside, but if I'm sitting there and I can see there's a concentration of vehicles on the road in a particular area, and all the wipers are going back and forth furiously, then I'm pretty damn sure it's raining hard, right? And that's probably a more accurate prediction of the weather than anything else. It's a bit of a made-up example, but it's something that may well make its way back, and then would apply equally well on the finance side, because I might give you, as an automotive finance company, a reduced monthly rental in exchange for use of your data, and I can monetize that data, so there's a bright future for this in my view.

Steve Kovsky:
Yeah. I think it's a potential win-win for everyone.

Brendan Gleeson:
Yeah.

Steve Kovsky:
It's a very exciting future, and I thank you for sharing it with us, Brendan, and giving us a glimpse into your world, and how it's going to affect our world, so thank you so much for being a guest on the show today.

Brendan Gleeson:
Thank you very much, Steve. Lovely to meet you. Thank you for your time. Appreciate it.

Steve Kovsky:
Well, that's the end of our episode for today, but if you'd like to get more information on the topics or our guest, check out blackberry.com/podcast. Get In: The Connected Vehicle Podcast from BlackBerry, is available wherever you get your podcasts, and don't forget to subscribe to keep up to date with our latest episodes.