Data driven lending: Navigating the subscription economy in hardware
Written by Afi Haneefa, Finance Director
March 27, 2023
In recent years, the demand for hardware subscription products has exploded as both retail and corporate customers seek to gain access to essential equipment for a small monthly fee, rather than incurring a large upfront capital outlay. This shift in purchasing preferences has spurred the growth of hardware manufacturers offering subscription-based services, creating new opportunities and challenges in the lending landscape.
Navigating the complex landscape of lending to hardware OEMs (Original Equipment Manufacturers) that are operating a subscription-based “as-a-service” business model, can be challenging for financial institutions. This is magnified even more during this period of heightened economic risk and uncertainty. Businesses following this model often grapple with unique cash flow dynamics and working capital requirements, as their revenue collection shifts from upfront payments to recurring, smaller payments over the subscription period. This revenue structure, while much more profitable in the long term, results in a temporary short-term cash flow gap that must be bridged to sustain ongoing operations, investments, and growth.
Traditional lending models may not fully address these cash flow dynamics and working capital needs of businesses operating on a subscription basis. Their recurring cashflow is often dependant on the piece of hardware that is operating in the field and with no view on the performance of this equipment, lenders are left with a limited understanding of the borrowers' financial health, increasing their potential risk exposure. Fortunately, Twist’s platform can help financial institutions overcome these challenges and lend with confidence.
In recent years, the demand for hardware subscription products has exploded as both retail and corporate customers seek to gain access to essential equipment for a small monthly fee, rather than incurring a large upfront capital outlay. This shift in purchasing preferences has spurred the growth of hardware manufacturers offering subscription-based services, creating new opportunities and challenges in the lending landscape.
Navigating the complex landscape of lending to hardware OEMs (Original Equipment Manufacturers) that are operating a subscription-based “as-a-service” business model, can be challenging for financial institutions. This is magnified even more during this period of heightened economic risk and uncertainty. Businesses following this model often grapple with unique cash flow dynamics and working capital requirements, as their revenue collection shifts from upfront payments to recurring, smaller payments over the subscription period. This revenue structure, while much more profitable in the long term, results in a temporary short-term cash flow gap that must be bridged to sustain ongoing operations, investments, and growth.
Traditional lending models may not fully address these cash flow dynamics and working capital needs of businesses operating on a subscription basis. Their recurring cashflow is often dependant on the piece of hardware that is operating in the field and with no view on the performance of this equipment, lenders are left with a limited understanding of the borrowers' financial health, increasing their potential risk exposure. Fortunately, Twist’s platform can help financial institutions overcome these challenges and lend with confidence.
Twist platform overview
Twist platform overview
Twist platform overview
One of the major challenges that lenders face when dealing with hardware manufacturers is the technical barrier to accessing crucial data. Traditional processes using spreadsheets and other similar tools for gathering and evaluating this information can be slow, cumbersome, prone to error and lacking real-time insights.
One of the major challenges that lenders face when dealing with hardware manufacturers is the technical barrier to accessing crucial data. Traditional processes using spreadsheets and other similar tools for gathering and evaluating this information can be slow, cumbersome, prone to error and lacking real-time insights.
One of the major challenges that lenders face when dealing with hardware manufacturers is the technical barrier to accessing crucial data. Traditional processes using spreadsheets and other similar tools for gathering and evaluating this information can be slow, cumbersome, prone to error and lacking real-time insights.
The platform’s core functionality centres around its ability to process and synthesise complex data sets, transforming raw data into actionable insights that can be readily used by lenders to assess the creditworthiness and risk profile of potential borrowers. By leveraging Twist’s advanced analytics capabilities, financial institutions can make more informed lending decisions, streamline their credit approval processes, and confidently support hardware manufacturers in their growth journey.
The live nature of the data collected by our platform allows financial institutions to monitor borrowers’ ongoing performance with real-time updates on key metrics and KPIs that are critical for managing risk and ensuring repayment. This continuous performance monitoring feature not only helps lenders maintain a comprehensive understanding of their borrowers’ financial situation but also allows them to proactively address potential issues and adapt their lending strategies accordingly.
The platform’s core functionality centres around its ability to process and synthesise complex data sets, transforming raw data into actionable insights that can be readily used by lenders to assess the creditworthiness and risk profile of potential borrowers. By leveraging Twist’s advanced analytics capabilities, financial institutions can make more informed lending decisions, streamline their credit approval processes, and confidently support hardware manufacturers in their growth journey.
The live nature of the data collected by our platform allows financial institutions to monitor borrowers’ ongoing performance with real-time updates on key metrics and KPIs that are critical for managing risk and ensuring repayment. This continuous performance monitoring feature not only helps lenders maintain a comprehensive understanding of their borrowers’ financial situation but also allows them to proactively address potential issues and adapt their lending strategies accordingly.
The platform’s core functionality centres around its ability to process and synthesise complex data sets, transforming raw data into actionable insights that can be readily used by lenders to assess the creditworthiness and risk profile of potential borrowers. By leveraging Twist’s advanced analytics capabilities, financial institutions can make more informed lending decisions, streamline their credit approval processes, and confidently support hardware manufacturers in their growth journey.
The live nature of the data collected by our platform allows financial institutions to monitor borrowers’ ongoing performance with real-time updates on key metrics and KPIs that are critical for managing risk and ensuring repayment. This continuous performance monitoring feature not only helps lenders maintain a comprehensive understanding of their borrowers’ financial situation but also allows them to proactively address potential issues and adapt their lending strategies accordingly.
Data collection and Key Metrics / KPIs
Data collection and Key Metrics / KPIs
Data collection and Key Metrics / KPIs
Twist’s strength lies in its ability to collect and analyse an extensive range of data points, providing financial institutions with a comprehensive understanding of the hardware manufacturers' operations and financial health. We focus on industries such as e-mobility, sensors, and robotics where businesses operate on a B2B subscription basis, and traditional lending models may fall short.
Some examples of the types of data we collect include:
Twist’s strength lies in its ability to collect and analyse an extensive range of data points, providing financial institutions with a comprehensive understanding of the hardware manufacturers' operations and financial health. We focus on industries such as e-mobility, sensors, and robotics where businesses operate on a B2B subscription basis, and traditional lending models may fall short.
Some examples of the types of data we collect include:
Twist’s strength lies in its ability to collect and analyse an extensive range of data points, providing financial institutions with a comprehensive understanding of the hardware manufacturers' operations and financial health. We focus on industries such as e-mobility, sensors, and robotics where businesses operate on a B2B subscription basis, and traditional lending models may fall short.
Some examples of the types of data we collect include:
IoT
Track the real-time location, movement, performance and usage of hardware, offering insights into asset utilisation, potential maintenance needs, and overall health of the hardware
Contracts
Contract terms, payment history, and customer retention rates allows financial institutions to assess the borrower's revenue stability
Collections
Monitoring the collections data on subscription contracts allows insight into the OEM’s cash flow patterns, payment consistency, ability to collect contracted revenue and speaks to overall financial performance
Servicing
Maintenance history, servicing costs, and downtime offers an in-depth look at the assets' reliability and overall cost of ownership. Crucial in evaluating the OEM’s ability to manage financial obligations and the likelihood of churn from customers experiencing poor asset uptime
To make the most of the in-depth data collected by our platform, financial institutions need to focus on key metrics and KPIs that are relevant to lending decisions and risk assessments. These metrics and KPIs offer valuable insights into the performance, financial stability, and creditworthiness of hardware manufacturers.
To make the most of the in-depth data collected by our platform, financial institutions need to focus on key metrics and KPIs that are relevant to lending decisions and risk assessments. These metrics and KPIs offer valuable insights into the performance, financial stability, and creditworthiness of hardware manufacturers.
To make the most of the in-depth data collected by our platform, financial institutions need to focus on key metrics and KPIs that are relevant to lending decisions and risk assessments. These metrics and KPIs offer valuable insights into the performance, financial stability, and creditworthiness of hardware manufacturers.
Product metrics
Product metrics
Product metrics
Examples of critical metrics to indicate product quality and customer satisfaction:
Examples of critical metrics to indicate product quality and customer satisfaction:
Examples of critical metrics to indicate product quality and customer satisfaction:
Company metrics
Company metrics
Company metrics
Examples of overall company metrics that can indicate sustainable growth:
Examples of overall company metrics that can indicate sustainable growth:
Examples of overall company metrics that can indicate sustainable growth:
Twist data use cases
Twist data use cases
Credit underwriting
Credit underwriting
Credit underwriting
Providing access to a wealth of data points, our platform enables lenders to perform a more in-depth analysis of a borrower's creditworthiness.
Providing access to a wealth of data points, our platform enables lenders to perform a more in-depth analysis of a borrower's creditworthiness.
Providing access to a wealth of data points, our platform enables lenders to perform a more in-depth analysis of a borrower's creditworthiness.
Performance benchmarking
Performance benchmarking
Performance benchmarking
Comparing the borrower's performance with industry peers, lenders can identify areas where the borrower may be underperforming, helping them make informed decisions
Comparing the borrower's performance with industry peers, lenders can identify areas where the borrower may be underperforming, helping them make informed decisions
Comparing the borrower's performance with industry peers, lenders can identify areas where the borrower may be underperforming, helping them make informed decisions
Asset performance
Asset performance
Asset performance
Provides insight in the stability of cashflow and a prediction of customer satisfaction
Provides insight in the stability of cashflow and a prediction of customer satisfaction
Provides insight in the stability of cashflow and a prediction of customer satisfaction
Payment history
Payment history
Payment history
Track past collections of the OEM to evaluate their ability to collect payments from their contracted subscribers
Track past collections of the OEM to evaluate their ability to collect payments from their contracted subscribers
Track past collections of the OEM to evaluate their ability to collect payments from their contracted subscribers
Churn prediction
Churn prediction
Churn prediction
Using a combination of telematics data and servicing data, Twist can provide a fleet level view predicting the likelihood if/when customers will churn
Using a combination of telematics data and servicing data, Twist can provide a fleet level view predicting the likelihood if/when customers will churn
Using a combination of telematics data and servicing data, Twist can provide a fleet level view predicting the likelihood if/when customers will churn
Revenue data
Revenue data
Revenue data
Insight into revenue stability and growth helps in assessing the company's ability to expand its business and attract more customers
Insight into revenue stability and growth helps in assessing the company's ability to expand its business and attract more customers
Insight into revenue stability and growth helps in assessing the company's ability to expand its business and attract more customers
Environmental data
Environmental data
Environmental data
Impacts such as greenhouse gas emissions and waste reduction, calculated by Twist, gives insight into long term sustainability. A company with a low environmental impact is is likely to have a better ability to repay a loan
Impacts such as greenhouse gas emissions and waste reduction, calculated by Twist, gives insight into long term sustainability. A company with a low environmental impact is is likely to have a better ability to repay a loan
Impacts such as greenhouse gas emissions and waste reduction, calculated by Twist, gives insight into long term sustainability. A company with a low environmental impact is is likely to have a better ability to repay a loan
Customer data
Customer data
Customer data
Demographic segmentation, purchasing patterns, churn rates - provides insight into the potential for revenue growth and performance of the business. e.g. diversified customer base and low churn rate gives a higher confidence on business performance compared to a concentrated customer base with high churn rate
Demographic segmentation, purchasing patterns, churn rates - provides insight into the potential for revenue growth and performance of the business. e.g. diversified customer base and low churn rate gives a higher confidence on business performance compared to a concentrated customer base with high churn rate
Demographic segmentation, purchasing patterns, churn rates - provides insight into the potential for revenue growth and performance of the business. e.g. diversified customer base and low churn rate gives a higher confidence on business performance compared to a concentrated customer base with high churn rate
Risk monitoring
Risk monitoring
Risk monitoring
The continuous performance monitoring feature of our platform ensures that lenders can stay up-to-date with the borrower's financial health and adapt their lending strategies accordingly, reducing the risk of unforeseen issues and improving overall risk management.
The continuous performance monitoring feature of our platform ensures that lenders can stay up-to-date with the borrower's financial health and adapt their lending strategies accordingly, reducing the risk of unforeseen issues and improving overall risk management.
The continuous performance monitoring feature of our platform ensures that lenders can stay up-to-date with the borrower's financial health and adapt their lending strategies accordingly, reducing the risk of unforeseen issues and improving overall risk management.
Fraud monitoring
Fraud monitoring
Fraud monitoring
Twist connects directly to IoT and telematics data. Attempts at editing or forging data can be identified as outliers. With a live stream of data, we can tell exactly when an asset is used and identify the asset location. We also see all payment data to build a full picture
Twist connects directly to IoT and telematics data. Attempts at editing or forging data can be identified as outliers. With a live stream of data, we can tell exactly when an asset is used and identify the asset location. We also see all payment data to build a full picture
Twist connects directly to IoT and telematics data. Attempts at editing or forging data can be identified as outliers. With a live stream of data, we can tell exactly when an asset is used and identify the asset location. We also see all payment data to build a full picture
Covenant monitoring
Covenant monitoring
Covenant monitoring
Lenders can use data directly from customers via Twist to set covenant limits. e.g. stipulating that utilisation can fall no lower than 60%. They can then choose to recall a loan before their capital becomes at risk
Lenders can use data directly from customers via Twist to set covenant limits. e.g. stipulating that utilisation can fall no lower than 60%. They can then choose to recall a loan before their capital becomes at risk
Lenders can use data directly from customers via Twist to set covenant limits. e.g. stipulating that utilisation can fall no lower than 60%. They can then choose to recall a loan before their capital becomes at risk
Early warning indicators
Early warning indicators
Early warning indicators
Real-time data provided by our platform allows lenders to identify potential issues or risks in the borrower's operations early on, enabling them to proactively address these concerns and mitigate potential losses
Real-time data provided by our platform allows lenders to identify potential issues or risks in the borrower's operations early on, enabling them to proactively address these concerns and mitigate potential losses
Real-time data provided by our platform allows lenders to identify potential issues or risks in the borrower's operations early on, enabling them to proactively address these concerns and mitigate potential losses
Twist offers a powerful solution for financial institutions looking to lend to hardware OEMs operating on a subscription basis. By providing unparalleled visibility into the financial health and performance of borrowers, leveraging advanced analytics capabilities, and focusing on key metrics and KPIs, the platform enables lenders to make more informed lending decisions, streamline their credit approval processes, and proactively monitor borrowers' ongoing performance. With Twist's platform, financial institutions can mitigate risk and confidently support the next generation of hardware manufacturers in high-potential industries.
Twist offers a powerful solution for financial institutions looking to lend to hardware OEMs operating on a subscription basis. By providing unparalleled visibility into the financial health and performance of borrowers, leveraging advanced analytics capabilities, and focusing on key metrics and KPIs, the platform enables lenders to make more informed lending decisions, streamline their credit approval processes, and proactively monitor borrowers' ongoing performance. With Twist's platform, financial institutions can mitigate risk and confidently support the next generation of hardware manufacturers in high-potential industries.
Twist offers a powerful solution for financial institutions looking to lend to hardware OEMs operating on a subscription basis. By providing unparalleled visibility into the financial health and performance of borrowers, leveraging advanced analytics capabilities, and focusing on key metrics and KPIs, the platform enables lenders to make more informed lending decisions, streamline their credit approval processes, and proactively monitor borrowers' ongoing performance. With Twist's platform, financial institutions can mitigate risk and confidently support the next generation of hardware manufacturers in high-potential industries.